Ally Financial Annual Report 2017

FY2017 Annual Report · Ally Financial

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20 17 ANNUAL REPORT

O UR BUS INESS: A LE ADER I N DI GI TA L
F INANCIAL SERVIC ES

Ally Financial Inc. (NYSE: ALLY) is a leading digital financial
services company with assets of $167.1 billion as of December
31, 2017. As a client-centric company with passionate customer
service and innovative financial solutions, Ally is relentlessly
focused on “Doing it Right” and being a trusted financial partner
for its consumer, commercial, and corporate customers. Ally’s
award-winning online bank (Ally Bank, Member FDIC and Equal
Housing Lender) offers mortgage-lending services and a variety
of deposit and other banking products, including CDs, online
savings, money market and checking accounts, and IRA products.
Ally also promotes the Ally CashBack Credit Card. Additionally,
Ally offers securities brokerage and investment advisory services
through Ally Invest. Ally remains one of the largest full-service
auto finance operations in the country with a complementary
auto-focused insurance business, which together serve more
than 18,000 dealer customers and millions of auto consumers.
Ally’s robust corporate finance business offers capital for equity
sponsors and middle-market companies.

OU R VISION: B E A RELENTL ESS ALLY FO R
YOUR FINANCIAL WELL-BEI NG

Our commitment to our customers has been at the core of
who we are for nearly 100 years. We’re committed to constantly
creating and reinventing with the singular purpose of making
a real difference for our customers. That’s why we offer
award-winning online banking, rewarding credit and lending
experiences, unmatched auto financing products and services
and a growing wealth management and brokerage platform.

2017 ACCOL ADES:

2 017 FIN A NC I AL HI GH LI GHTS :

total assets

total deposit growth

Total NET revenue

Adj. EPS*

Ally Bank Named “Best
Internet Bank” by Kiplinger’s
Personal Finance

Best Bank to
Work for by
American Banker

2017 Kantar TNS
Choice Award for
Direct Banking

Gold Stevie® Award for Best
Use of Technology in
Customer Service – Banking

* The following are non-GAAP financial measures which Ally believes are important to the reader of the Consolidated Financial Statements, but which are supplemental to and
not a substitute for U.S. GAAP measures: Adjusted Earnings per Share (Adj. EPS), Core Return on Tangible Common Equity (Core ROTCE), Adjusted Tangible Book Value (Adj.
Tangible Book Value), and Adjusted Efficiency Ratio (Adj. Efficiency Ratio). These measures are used by management and we believe are useful to investors in assessing the
company’s operating performance and capital. Refer to the 2017 Financial Tables later in this document for a Reconciliation to GAAP.

FROM THE CEO

DE AR SHAREHOLDERS,

In 2017, Ally made extraordinary progress building a leading
digital financial services company. In addition to expanding
and enhancing the products we offer our customers, we
posted solid financial results, and had positive regulatory
developments, all of which helped to produce very strong total
returns for our shareholders.

In May 2017, we launched Ally Invest, our brokerage and
wealth management platform. This complemented the
launch in 2016 of the Ally CashBack Credit Card1 and our
direct-to-consumer mortgage product, called Ally Home.
While establishing a full suite of banking products has been a
tremendous undertaking, I’m proud to have delivered what our
customers have been asking for, and excited about the future
prospects for our new businesses in 2018 and beyond.

Our auto finance business had another strong year,
delivering improving risk-adjusted returns while maintaining
credit discipline. We continue to serve over 18,000 dealer
relationships and millions of auto customers. We are also
mindful of rapidly evolving trends in the auto ecosystem and
enhanced our direct-to-consumer capabilities through the
rollout of Clearlane while also forming relationships with new
market participants, which enable us to offer consumer and
commercial financing in more of the places where consumers
are purchasing vehicles.

We achieved another significant

regulatory milestone in 2017 when the
Federal Reserve released Ally Bank
from certain legacy capital and
liquidity requirements, including
the commitment to maintain a
Tier 1 leverage ratio of at least 15%.
Ally has meaningfully transformed

both its operations and balance

sheet since becoming a
public company and
this development
completes the

process of normalizing our regulatory framework, allowing us
to optimize our capital and funding structure on a level playing
field with other U.S. banks.

Financially, 2017 was a tremendous year for the company
as we continued to execute our strategy, including the
retirement of $4.4 billion of high cost bonds without issuing
new institutional unsecured debt. We leveraged our growing
customer base and strong brand awareness to increase total
deposits by more than $14 billion in 2017, allowing us to
substantially reduce our wholesale funding footprint. At the
end of 2017, we had more than $93 billion of total deposits,
placing us among the top 15 banks based on domestic
interest bearing deposits. Our adjusted tangible book value
(Adj. Tangible Book Value)2 has increased more than $6 per
share since we went public in 2014, as we generated strong
earnings and reduced share count through accretive stock
buybacks. Adjusted earnings per share (Adj. EPS)2 was
$2.39 in 2017, the highest since our IPO, and is expected to
accelerate in the coming years.

In addition to our financial and operational accomplishments,
I remain very encouraged by the external tailwinds that
I believe will be incrementally positive for Ally in 2018,
including a lower corporate tax rate, the potential for a more
constructive regulatory backdrop for financial institutions,
and strong macroeconomic conditions. These developments
provide me with increased confidence to invest in our people,
our businesses, and our communities, while also allowing for
increased returns to shareholders.

Our vision of Ally – a customer-centric digital bank offering
a range of innovative and competitive products through
an exceptional customer experience, is a simple yet powerful
proposition. During 2017, we laid the groundwork for what
such a digitally-oriented and diversified bank should look like.
In 2018, this foundation, along with our unique brand and our
relentless commitment to “Do it Right” by our customers,
positions us favorably to continue on our financial path and
drive attractive returns for our owners.

1 The Ally CashBack Credit Card is issued by TD Bank N.A.

2 Represents a non-GAAP financial measure. These measures are used by management and we believe are useful
to investors in assessing the company’s operating performance and capital. Refer to the 2017 Financial Tables
later in this document for a Reconciliation to GAAP.

2017 FINANCIAL RESULTS

ALLY DELIVERED STRONG FI NANC IA L
RESULTS IN 2017, INCLUDI NG
TH E HIGHEST NET RE V ENUE AND
ADJ USTED EP S* SI NC E BECOMI NG
A PUBLIC COMPANY.

Net interest margin expanded by 8 basis points to 2.71% as
declines in lease revenue were more than offset by higher
retail and commercial auto loan yields. The increase in
yields, along with asset growth and higher deposit funding,
resulted in full year net financing revenue of $4.2 billion,
up $314 million compared to the prior year. Ally’s earning
assets expanded over $5 billion, while keeping risk-weighted
assets flat, demonstrating both strong loan growth and
efficient capital allocation.

We saw continued progress across our key financial metrics
in 2017, notably an 11% increase in Adj. EPS* from $2.16
per share to $2.39 per share. Adj. Tangible Book Value*
increased nearly $2 per share from $26.15 at the end of
2016 to $28.07 at the end of 2017, driven primarily by strong
earnings and a 6.4% reduction in our outstanding share
count. Our Adj. Efficiency Ratio* of 45.8% in 2017 continues
to trend favorably versus other banks as we leverage our
digital platform, with higher revenue largely offsetting
the investments made in new product expansion and IT
infrastructure. These factors are critical to growing a sticky
customer base and maintaining our leading position in an
increasingly competitive digital financial services landscape.

Ally’s funding optimization efforts, focused on increasing
deposits and minimizing wholesale markets funding, made
tremendous strides during 2017. Total deposit growth for
the year was $14.2 billion while retail deposits increased
$11.3 billion. The performance of our deposit franchise was
impressive, and we will continue to leverage our strong
position in online banking to drive efficient deposit growth
in the future.

RETAIL deposit growth

ADJUSTED EPS*

$2.00

$2.16

$2.39

TOTAL NET REVENUE

$4.9B

$5.4B

$5.8B

2015

2016

2017

2015

2016

2017

* Represents a non-GAAP financial measure. These measures are used by management and we believe are useful to investors in assessing the company’s operating
performance and capital. Refer to the 2017 Financial Tables later in this document for a Reconciliation to GAAP.

2 A LLY 2017 ANNUAL REPORT

AU TOMOTIVE FI NANCE

Ally’s auto finance business successfully navigated shifting
industry dynamics to deliver solid financial results in 2017, while
laying the groundwork for earnings growth in 2018 and beyond.
The auto business saw strong growth in net financing revenue
driven by the expansion of earning asset yields. Estimated retail
auto originated yield* increased 42 basis points in 2017 to
6.24% while commercial auto asset yields improved 46 basis
points year-over-year. Importantly, we’ve expanded retail and
commercial loan margins without making any meaningful
changes to our risk profile, with the weighted average FICO
score on new retail originations increasing slightly in 2017. Over
the past two years, as the lease portfolio and residual risk have
declined, we’ve deliberately and methodically transitioned to a full
credit spectrum retail auto finance portfolio mix that prioritizes
risk-adjusted returns over volume. This transition is now largely
complete, and we expect less year-over-year variability in
provision for loan losses while retail auto portfolio yields continue
to migrate higher.

Our operating lease portfolio at the end of 2017 was less than
$9.0 billion, relative to $19.5 billion three years ago, as we’ve
redeployed that capital to our diversified loan portfolio. While
our lease portfolio has declined, we still maintain a differentiated
lease business with competitive advantages in both residual
setting and remarketing, through our SmartAuction platform,
and we remain comfortable with this reallocation of risk within
our auto portfolio.

Complementing our retail auto finance franchise, our commercial
auto business maintains relationships with more than 18,000
dealers across all 50 states, providing a broad range of end-to-
end solutions and deep industry experience. Our vehicle floorplan
finance business, which accounts for approximately 85% of our
commercial auto loan portfolio, benefited from higher asset yields
and elevated balances in 2017, driving commercial auto revenue
up $238 million year-over-year to $1.3 billion. Additionally, 2017
marks the sixth consecutive year in which commercial auto
portfolio losses have been less than or equal to one basis point,
demonstrating both the strength of our dealer customers and our
associates’ risk management expertise.

1000+

500-999

250-499

100-249

1-99

* Estimated retail auto originated yield is a forward-looking non-GAAP financial measure determined by calculating the estimated average annualized yield for loans originated

during the period.

3 A LLY 2017 A NNUAL REPORT

2017 FINANCIAL RESULTS

INSUR ANCE

Our insurance business had an excellent year, increasing
2017 pre-tax income by 7% while introducing new products
and diversifying its dealer customer base. Total written
premiums increased $48 million to $996 million and we
continue to excel operationally. Notably, we were awarded
a long-term commitment as the preferred vehicle service
contract and protection plan provider for GM Canada.
Ally’s insurance offerings are important for our dealer
customers, providing commercial products as well as
retail products to improve profitability and bring customers
back to the dealership. The win with GM Canada, and our
impressive financial results, validate our strategy and
provide momentum heading into 2018.

CO R P O R AT E FIN A NCE

Since its founding nearly 20 years ago, Ally’s corporate
finance business has leveraged deep industry experience
and a strong network of relationships to deliver impressive
risk-adjusted returns. We invested in the business in 2017,
growing headcount and establishing new industry verticals,
such as healthcare real estate, and we have already seen
improved results. Pre-tax income for 2017 was $114 million,
up $43 million versus 2016, and total loans increased by
$0.8 billion to $4.0 billion, as we continue to take market
share and prudently expand the franchise. The business,
which focuses primarily on secured investments near the top
of the capital structure, has experienced an average annual
net charge-off rate of less than 0.15% over the past 10 years.

MORTGAGE FINANCE

Ally’s mortgage business saw total net revenue increase by
$39 million to $136 million in 2017 as total assets increased
by $3.4 billion, driven by bulk mortgage purchases.
Expenses increased year-over-year as we continue to expand
and refine Ally Home, our direct-to-consumer mortgage
business, which launched at the end of 2016. While still
in its infancy, our ability to deliver a mortgage product at
attractive rates is important to our customers and will help
to produce deeper and stickier relationships.

4 A LLY 2017 ANNUAL REPORT

2017 HIGHLIGHTS

DIVERSIFIED AND E XPANDED BUSI N ESS ES

Ally made significant strides in diversifying its consumer and commercial
product offerings in 2017. Our efforts in 2016, including the acquisition of
TradeKing, subsequently rebranded Ally Invest, and the introduction of a credit
card and mortgage product, provided an initial foundation for added revenue
diversification. During 2017, we worked hard to refine and improve these
products and bring to market a cohesive product suite that directly responded
to the needs of our customers. We remain in the early stages, but the market
opportunity is massive and the benefit for our customers is clear. Over the
past year, we’ve more than doubled the number of customers using multiple
Ally products.

Within auto finance, we continue to build upon our nearly 100 years of
experience by introducing innovative products and expanding into new
channels. In early 2017, we introduced Clearlane, an online auto lender
exchange, expanding Ally’s direct-to-consumer capabilities and providing
an end-to-end digital platform for consumers seeking financing and dealers
looking to drive online sales. As the auto industry continues to evolve, Ally
has taken advantage of new opportunities by forging new partnerships
with emerging players in the digital channel. With shifting consumer and
commercial demands within auto finance, Ally is committed to remaining on
the frontlines of responding to our customers, as we’ve done since
our founding.

AC HIE VED OUR TARGETS

Early in 2017, we provided shareholders with targets for key metrics, and I’m
very pleased that we met or exceeded those targets across the board. Our
results reflect consistent growth, prudent risk management, and significant
progress on our path to becoming a substantially deposit-funded institution.
From a profitability perspective, our Core ROTCE* of 9.8% and Adj. EPS*
growth of 11% were in line with our targets. Our Adj. Efficiency Ratio* of
45.8% is among the best in the banking industry and reflects our balanced
approach to expense management - controlling costs while still supporting
key businesses and infrastructure initiatives. During 2017, we were successful
in optimizing retail auto risk-adjusted returns over volumes, while holding
the line on asset quality, as evidenced by our retail auto net charge-offs
of 1.48%, relative to our 1.40% to 1.60% target. Lastly, our deposit growth
was exceptional, increasing $14.2 billion versus our $12+ billion target, driven
by expanding existing relationships and adding nearly 200 thousand
new customers.

ALLY AUTO

DEPOSITS

insurance

CASHBACK CARD

ALLY HOME

ally invest

corporate finance

5 A LLY 2017 A NNUAL REPORT

2017 HIGHLIGHTS

RETURN ED SIGNIFI CANT CAPITAL TO S H A R E H O L DE R S

In our first full year returning capital to common shareholders
since the IPO, we deployed $937 million of capital through share
repurchases and common dividends. We received CCAR non-
objection for the fourth year in a row. Relative to CCAR 2016, we
increased our share repurchase authorization by 9%, while also
increasing our common stock dividend from $0.08 in 2Q2017 to
$0.12 in 3Q2017, and then to $0.13 in 1Q2018. We repurchased
more than 34 million shares during 2017, reducing our outstanding
share count by 6.4%, net of employee-related common stock
grants. Efficient capital management is foundational to our
financial success and will continue to represent an attractive
opportunity to drive shareholder returns in 2018.

OUTSTANDING SHARE COUNT

6/30/2016

483.8MM

12/31/2016

467.0MM

12/31/2017

437.1MM

R ECO RD DE P O SIT GROW T H

Replacing high cost unsecured debt with deposit funding is a critical
component of our financial strategy. In addition to the $4.4 billion of
unsecured debt that matured in 2017, the company has more than
$7 billion of unsecured debt maturing from the beginning of 2018 through
the end of 2020. Ally increased retail and total deposits by $11.3 billion
and $14.2 billion, respectively, in 2017, allowing the company to abstain
from the institutional unsecured debt markets during the year. Our leading
online deposit business is a core competitive differentiator and a driver
of customer loyalty, as evidenced by our 95% customer retention in 2017.
Supporting our deposit growth is a unique brand that resonates with
customers, particularly the millennial demographic, with brand awareness
reaching 50% in 2017, our highest level ever. Our deposit products create
deep and sustainable customer relationships, placing us in an enviable
position as we expand into new products.

A L
tO
T
POS S
D
e
T
i

NOR MALIZED REGUL ATORY REQUIR E ME N TS

The Federal Reserve lifting certain legacy capital and liquidity
requirements for Ally Bank, including the commitment to maintain a
Tier 1 leverage ratio of at least 15%, was a tremendous achievement
for the company. Our ability to operate and fund ourselves on a
level playing field with other banks was previously constrained, and
the removal of this commitment allows us to maximize the value
of our deposit franchise. The elimination of substantially all legacy
regulatory commitments is a reflection of our strong governance
and financial performance, and critical in setting the stage for our
company to continue delivering on its financial and strategic goals.

6 A LLY 2017 ANNUAL REPORT

LOOK
E XTER NALLY

E XECUT E
WIT H E XCEL LENCE

ACT WITH
PROF ESSIO NALISM

DELIVER
RES ULTS

LE ADING THROUGH A DI STINCTIV E A ND ST RO NG C ULT U R E

The foundation of our success lies in our culture, which has
been a top priority of mine since becoming CEO over three
years ago. I believe a strong culture serves as the foundation
for strong operational results, which ultimately drives strong
financial performance and enhanced long-term returns for
all the constituents we serve, notably our stockholders. At the
core of our culture is an obsession with ‘Doing it Right’ for our
customers and communities while exemplifying our LEAD core
values day-in and day-out.

In 2017, Ally participated in a company-wide employee
engagement survey and scored higher than the Financial
Services industry benchmark. I believe an engaged workforce
drives greater efficiency, greater customer service and greater
profitability. While the results of this inaugural survey reflect an
engaged and dedicated workforce, we will strive for even stronger
results going forward as we continue to LEAD among financial
institutions.

One essential element of instilling a strong culture is reflecting
diverse perspectives. As such, Ally rolled out eight employee
resources groups (ERGs) in 2017 to serve as a platform to
create a workplace that values and gives voice to the many
perspectives of Ally associates. Additionally, we expanded
our diversity & inclusion platform by establishing a Diversity
Council and redesigning employee and manager training and

curriculum, all with the ultimate goal of continuing to foster an
inclusive environment.

As we work to ensure our culture remains aligned with our
relentless focus on customers, communities, associates and
shareholders, we will continue to invest in our people and build
upon the collaborative, diverse, and engaged environment that
we have today. As a customer-centric organization, our talent
is one of our most important assets and we provide progressive
benefits through our Total Rewards program, which includes
benefits such as 100% pay for both mothers and fathers for
up to 12 weeks of parental leave, robust health and wellness
offerings, and various career development opportunities, all of
which are aimed at enriching the lives of our associates both
at work and outside of it. I’m very proud that Ally was named
one of the “Best Banks to Work For” by American Banker in
2017, a program designed to recognize outstanding places of
employment in the US banking sector.

All companies experience business and economic cycles,
technological disruption, and demographic shifts – and we
are currently at the crossroads of all these rapidly accelerating
forces. Ally’s strong culture and passionate associate base
allow us to continue to innovate and serve our customers
at the highest level.

2017 ACCOL ADES:

Best Companies to work
for Women and Millennials
by Women’s Choice Award

7 A LLY 2017 A NNUAL REPORT

Best Place to Work by
Charlotte Business Journal

Cool Places to Work

Best Places to Work by
Human Rights Campaign

COMMITTED TO OUR COMMUNITIES

O UR CULTURE IS CENTERED ON BE IN G
AN ALLY – TO OUR COLLE AGUES, O U R
C USTOMERS AND OUR COMMUNI TIES

This commitment to enabling progress and making a positive
social impact is why Ally strives to support and strengthen
the communities where we live and work. In addition
to utilizing our corporate philanthropy efforts to make
meaningful and sustainable differences in our communities,
Ally employees help thousands of individuals across the
country through donations of time, goods and dollars.

ST R ATEGIC AND EMPLOYEE GIV ING

When Hurricanes Harvey and Irma hit in late 2017, Ally
employees quickly mobilized to support the communities
most impacted by the devastating storms. In addition to
employee and corporate donations and distribution of
hygiene kits, Ally offered temporary relief to customers,
including fee waivers and reversals, loan extensions, and
ATM fee reimbursements, among other services intended to
help impacted customers. However, the true spirit of Ally’s
LEAD core values was exemplified through individual stories,
including the many employees who used their personal boats
for search-and-rescue missions and delivery of food and
medicine to flooded areas.

8 A LLY 2017 ANNUAL REPORT

Ally’s strategic giving program supports charitable
organizations across the country that address critical needs
in the areas of community services, affordable housing and
financial literacy. In 2017, Ally funded initiatives that helped
address food insecurity, homelessness, job training and
mentoring, financial education, foreclosure counseling and
community revitalization.

8%
Youth

7 %
Housing

11%
Health

CORPORATE
GRANT
DISTRIBUTION

36%
Community
Services

38%
Education &
Financial Literacy

FI N AN C IA L LIT E R AC Y

Ally Wallet Wise is a free financial education program that
teaches consumers the basics of personal finance. Through
this program, we partner with community organizations across
the country to offer local, in-person sessions, as well as online
courses at no cost to consumers. Topics covered include Credit,
Budget, Banking & Investing and Automotive. Since launching
in 2011, Ally Wallet Wise has provided free financial education
to more than 107,000 consumers. An extension of Ally Wallet
Wise is a children’s book that we created called ‘Planet Zee and
the Money Tree,’ which teaches money concepts to children
ages 6-10. In 2017, Ally associates read this book to more than
21,000 children in schools across the country.

In addition to Ally’s Wallet Wise program, we work closely
with organizations such as Junior Achievement, JumpStart,
National Council on Economic Education and the Federal
Reserve Bank of Chicago’s Money Smart Week to promote
financial education. In 2017, approximately 700 employees
volunteered more than 2,500 hours teaching financial
education in partnership with these organizations.

SU P P O RT IN G AU TO MOT IV E
DE AL E R S NAT IO N W ID E

• Auto dealerships represent a critical part of the
US economy and Ally is proud to have supported
these small businesses for nearly 100 years.

• Ally has approximately $37 billion of outstanding
loans to auto dealers and we provided more than
$1.5 million to more than 500 charities in support
of dealer relationships during 2017.

• For the 7th year in a row, Ally has partnered with
Time magazine on the “Dealer of the Year” award
to honor new-car dealers in America who exhibit
exceptional performance in their dealerships and
perform distinguished community service.

Ally donated school supplies to underserved students in Detroit and Charlotte

Ally employees volunteered nearly 17,000 hours with
charitable organizations during 2017 and approximately
45 percent of the employee population participated in
giving back through a donation and/or volunteering. The
culmination of Ally’s employee giving program is Giving
Back Month, which occurs each November, and includes an
additional matching contribution on employee donations.
Giving Back Month celebrated its six year anniversary in 2017,
featuring more than 175 unique volunteer and fundraising
events. Collectively, these efforts resulted in donations,
including Ally’s company match, of more than $800,000
and nearly 6,000 volunteer hours.

9 A LLY 2017 A NNUAL REPORT

SPOTLIGHT ON INNOVATION

F INAN CIAL SERVICES I S A R API DLY E VO LV I N G S EC TO R T H AT H AS E XP E R I E N CE D
SIGNIFICANT DIGITAL DI SRUPTI ON .

internal and external transfers between accounts via Alexa.
The Ally Skill also includes CurrenSeeSM, a customer feature
that helps consumers make more informed purchase
decisions by converting the price of any item a customer
plans to buy into the number of working hours it will take to
earn the amount.

Our organizational commitment to embracing innovation
is founded in our obsession with bringing our customers
the best digital banking experience possible. In order to
stay on the forefront of emerging financial technology, we
launched Ally Ventures, an experienced team of professionals
that explores opportunities to engage and work with
businesses that align with our strategic objectives. We
help these young businesses grow through investment,
commercial relationships and mentorship with access to a
broad range of resources. To that end, we've partnered with
three financial technology accelerator programs to identify
commercial opportunities and investments at earlier stages
of development.

As one of the original disruptors in online banking, Ally has a
deep and intrinsic commitment to innovation that has been
critical to our success.

We’ve recently invested in our direct and digital lending
capabilities within our auto business, including the
introduction of Clearlane, while focusing on developing and
expanding relationships with new online emerging entrants.
These relationships allow us to offer financing and insurance
products in more of the places where consumers are
purchasing vehicles.

We continue to leverage technology to enhance the customer
banking experience, providing more tools to allow our
customers to make smarter, faster and more calculated
financial decisions. In early 2017, we introduced the Ally
Card Controls app, designed to give customers more
control of their Ally Bank debit card by allowing customers
to define when, where and how their card is used and
view transactions, establish spending limits, and manage
notifications. Additionally, we rolled out the Ally Skill for
Alexa, providing customers a quick and easy way to access
and manage their Ally Bank accounts using an Amazon®
Alexa-enabled device. In addition to simplifying everyday
banking tasks, Ally was the first bank to offer voice-activated

"ALEXA, OPEN ALLY."

Amazon, Alexa, and all related logos and motion marks are trademarks of Amazon.com, Inc. or its affiliates.

10 A LLY 2017 ANNUAL REPORT

Ally Card Controls App

OUR COMMITMENT TO YOU

DO RIGHT BY OUR SHAREHOLDERS

Looking forward, we remain focused on the ingredients of
delivering strong long-term shareholder returns and we will
continue to invest in the brand, build scale in our products,
optimize our capital deployment, and do more for our customers.
2017 was a great year for Ally shareholders and we will leverage
the progress we’ve made and the momentum we’ve created to
raise the bar in 2018. We’ve built a diverse and inclusive digital
financial services company with a unique culture and a steadfast
dedication to ‘Doing it Right.’ The strong foundation we’ve built,
coupled with lower corporate tax rates, the digitalization of
banking, and favorable demographic trends, make it an exciting
time to be an Ally stakeholder.

In closing, I want to express my gratitude and appreciation to the
Board of Directors for their support, unwavering commitment,
and strategic guidance. At the cornerstone of our success, I want
to thank our talented associates and senior leadership team for
their passion and commitment to excellence.

Lastly, thank you to all fellow shareholders for your continued
support of Ally – you have our commitment to deliver long-term
value to each of you.

JE FF RE Y J. BROWN
CH IE F EXECUTI VE OFF ICER

2017 TOTAL RETURN COMPARISON*

e
u
a
V
x
e
d
n

160

150

140

130

120

110

100

INVEST
IN THE
BRAND

BUILD
SCALE IN THE
PRODUCTS

OPTIMIZE
CAPITAL
DEPLOYMENT

DO MORE
FOR OUR
CUSTOMERS

CONTINUED
EARNINGS
GROWTH

+56%

+22%

+19%

1 2 / 3 1/1 6

1/ 3 1/17

8 /17

2 / 2

3 / 3 1/17

0 /17

4 / 3

5 / 3 1/17

0 /17

6 / 3

7/ 3 1/17

8 / 3 1/17

0 /17

9 / 3

1 0 / 3 1/17

0 /17

11/ 3

1 2 / 3 1/17

Ally

KBW Bank Index

S&P 500 Index

* Calculation reflects 2017 stock performance assuming dividends are reinvested in each respective stock or index

11 A LLY 2017 ANNUAL REPORT

2017 FINANCIAL TABLES

ADJUSTED E ARNI NGS PER SHARE

($ per share)

FY 2017

FY 2016

FY 2015

GAAP EPS (diluted)
Discontinued operations,
net of tax
Core OID & Accelerated OID,
net of tax1,2
Repositioning items,
net of tax2,3
Significant discrete tax items
Capital actions (Series A & G)
Adjusted EPS

$2.04
(0.01)

$2.15
0.09

$(2.66)
(0.81)

0.10

0.08

0.01

0.48

0.26
-
$2.39

(0.18)
0.00
$2.16

-
4.90
$2.00

ADJUSTED TANGIBLE B OOK VALUE
PER SHAR E

($ per share)

FY 2017

FY 2016

FY 2015

GAAP shareholder's equity
Preferred equity
Goodwill & intangibles, net
of DTLs
Tangible common equity
Tax-effected Core OID
balance4
Adjusted tangible
book value per share

$30.9
-
(0.7)

30.2
(2.1)

$28.5
-
(0.6)

27.9
(1.7)

$27.9
(1.4)
(0.1)

26.4
(1.8)

$28.1

$26.2

$24.6

ADJUSTED EFFICIENC Y R ATIO

($ millions)

FY 2017

FY 2016

FY 2015

Total noninterest expense
Rep and warrant expense
Repositioning items3
Insurance expense
Adjusted noninterest
expense
Total net revenue
Core OID & Accelerated OID1
Repositioning items3
Insurance revenue
Adjusted net revenue
Adjusted efficiency ratio

$3,110
(0)
-
950
$2,160

$5,765
71
-
(1,118)
$4,718
45.8%

$2,939
(6)
9
940
$1,997

$5,437
59
3
(1,097)
$4,401
45.4%

$2,761
(13)
7
879
$1,888

$4,861
59
342
(1,090)
$4,172
45.3%

CO R E R E TU R N ON TAN GI B LE COMMO N
EQUI T Y ( ROTCE )

($ millions)

GAAP net income attributable to
common shareholders
Discontinued operations,
net of tax
Core OID & Accelerated OID, net
of tax1,2
Repositioning items, net of tax2,3
Significant discrete tax items
Capital actions (Series A & G)
Core net income attributable to
common shareholders
GAAP shareholder's equity5
Preferred equity5
Goodwill & intangibles, net of DTLs5
Tangible common equity
Core OID balance5
Net deferred tax asset5
Normalized common equity
Core RoTCE5

FY 2017

FY 2016

FY 2015

$929

$1,037

$(1,282)

(3)

-
119
-
$1,091

7
(84)
1
$1,043

(392)

231
-
2,394
$990

$13,406
-
(293)
$13,112
(1,213)
(737)
$11,162
9.8%

$13,378
(348)
(160)
$12,870
(1,276)
(1,182)
$10,412
10.0%

$14,419
(976)
(27)
$13,416
(1,327)
(1,583)
$10,506
9.4%

O R IG IN A L I SSU E DI SCOUN T
A MO RT I Z AT IO N E XPE NS E

($ millions)

Core original issue discount
(Core OID) amortization expense
(Ex. Accelerated OID)1
Other OID
GAAP original issue discount
amortization expense

FY 2017

FY 2016

FY 2015

$71

$57

$45

20
$90

21
$78

16
$61

O U TSTA NDI NG OR IG IN A L I SS UE
DI SCO U N T BA L A NC E

($ millions)

Core outstanding original issue
discount balance (Core OID balance)
Other outstanding OID balance
GAAP outstanding original issue
discount balance

FY 2017

FY 2016

FY 2015

$(1,178)

$(1,249)

$(1,304)

(57)
$(1,235)

(77)
$(1,326)

(87)
$(1,391)

(1) Accelerated OID is the recognition of issuance expenses related to calls of redeemable debt
(2) Tax rate of 35% starting 1Q2016; 34% prior
(3) Repositioning items are primarily related to the extinguishment of high cost legacy debt and strategic activities
(4) Tax rate of 21% starting 4Q2017, 35% starting 1Q2016; 34% prior
(5) Calculated using 2-period average

12 A LLY 2017 ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to

Commission file number: 1-3754
ALLY FINANCIAL INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

38-0572512
(I.R.S. Employer
Identification No.)

Ally Detroit Center
500 Woodward Ave.
Floor 10, Detroit, Michigan
48226
(Address of principal executive offices)
(Zip Code)
(866) 710-4623
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act (all listed on the New York Stock Exchange):

Title of each class
Common Stock, par value $0.01 per share

8.125% Fixed Rate/Floating Rate Trust Preferred Securities,
Series 2 of GMAC Capital Trust I

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (§ 229.405 of this chapter) is not contained
herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting)

Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the Registrant’s common stock (Common Stock) held on June 30, 2017 by non-affiliated entities was
approximately $9.5 billion (based on the June 30, 2017 closing price of Common Stock of $20.90 per share as reported on the New York
Stock Exchange).
At February 16, 2018, the number of shares outstanding of the Registrant’s common stock was 434,771,498 shares.
Documents incorporated by reference: portions of the Registrant’s Proxy Statement for the annual meeting of stockholders to be held on
May 8, 2018, are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13, and 14 of Part III.

INDEX

Ally Financial Inc. Form 10-K

Part I

Item 1.

Item 1A.

Item 1B.

Item 2.

Item 3.

Item 4.

Part II
Item 5.

Item 6.

Item 7.

Business

Risk Factors

Unresolved Staff Comments

Properties

Legal Proceedings

Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Management’s Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Item 9.

Item 9A.

Item 9B.

Part III

Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

Part IV

Item 15.

Item 16.

Signatures

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Controls and Procedures

Other Information

Directors, Executive Officers, and Corporate Governance

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accountant Fees and Services

Exhibits, Financial Statement Schedule

Form 10-K Summary

Page

101

102

104

179

180

182

183

185

186

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

Part I

Ally Financial Inc. • Form 10-K

Item 1. Business
Our Business

Ally Financial Inc. (together with its consolidated subsidiaries unless the context requires otherwise, Ally, the Company, or we, us, or

our) is a leading digital financial services company and top 25 U.S. financial holding company (FHC) with $167.1 billion in assets as of
December 31, 2017, offering diversified financial products and services for consumers, businesses, automotive dealers, and corporate clients.
Ally operates with a distinctive brand, an innovative approach, and a relentless focus on our customers. We are a Delaware corporation and
are registered as a bank holding company (BHC) under the Bank Holding Company Act of 1956 as amended (BHC Act) and an FHC under
the Gramm-Leach-Bliley Act of 1999 as amended (GLB Act). We are one of the largest full service automotive finance operations in the
country with a legacy that dates back to 1919, a deep expertise in automotive lending, and a complementary automotive-focused insurance
business. Our wholly-owned banking subsidiary, Ally Bank, with total assets of $137.4 billion and deposits of $93.2 billion at December 31,
2017, has received numerous industry awards for its services and capabilities and is one of the largest and most respected online banks,
uniquely positioned for the observed shifting trends in consumer banking preferences for digital banking. We offer mortgage lending services
and a variety of deposit and other banking products, including CDs, online savings, money market and checking accounts, and IRA products.
We also promote a cash back credit card. We have recently integrated a growing digital wealth management and online brokerage platform to
enable consumers to have a variety of options in managing their savings and wealth. Additionally, through our corporate finance business, we
primarily offer senior secured leveraged cash flow and asset-based loans to middle-market companies.

Our primary lines of business are Dealer Financial Services, which comprises our Automotive Finance and Insurance operations,

Mortgage Finance, and Corporate Finance. Corporate and Other primarily consists of centralized corporate treasury activities, the
management of our legacy mortgage portfolio, the activity related to Ally Invest—our digital wealth management and online brokerage
platform—and reclassifications and eliminations between the reportable operating segments.

At December 31, 2017, 82% of Ally’s total assets resided within Ally Bank. Over the past year, we have strengthened and simplified our

organizational structure by establishing Ally Bank as the primary business entity of Ally. Additionally, during the third quarter of 2017,
banking agencies lifted certain commitments that Ally Bank had made in connection with its application for membership in the Federal
Reserve System, including the commitment to maintain a Tier 1 leverage ratio of at least 15%. As a result of these actions, the increased
utilization of Ally’s leading digital bank is expected to be a fundamental driver of financial performance, an improved funding profile, and
operational efficiency. Ally Bank’s assets and operating results are included within our Automotive Finance, Mortgage Finance, and
Corporate Finance segments, as well as Corporate and Other, based on its underlying business activities.

Our strategic focus is centered around maintaining a leading, respected, and growing brand, gaining scale with an expanded consumer
product offering, and further growing and diversifying our corporate finance and other commercial lending portfolios. Within our Automotive
Finance and Insurance operations, we are focused on strengthening our network of dealer relationships and pursuing digital distribution
channels for our products and services, including partnerships with direct lending institutions and digital automotive distributors—all while
maintaining an appropriate level of risk. This includes extending our leading position in automotive finance in the United States by continuing
to provide automotive dealers and their retail customers with premium service, a comprehensive product suite, consistent funding, and
competitive pricing—reflecting our commitment to the automotive industry. Within our other banking operations—including Mortgage
Finance and Corporate Finance—we seek to prudently expand our consumer and commercial banking products and services while providing a
high level of customer service. Through our digital product offerings, we continue to focus on delivering significant and sustainable growth in
deposit customers and balances while optimizing our cost of funds. At Ally Invest, we look to augment our securities brokerage and
investment advisory services to more comprehensively assist our customers in managing their savings and wealth.

We continue to invest in enhancing the customer experience with integrated features across product lines on our digital platform. We also

continue to build on our existing foundation of approximately 5.7 million consumer automotive financing and primary deposit customers,
strong brand, and innovative culture. Upon launching our first ever enterprise-wide campaign themed “Do It Right,” we introduced a broad
audience to our full suite of digital financial services, which emphasizes our relentless customer-centric focus and commitment to constantly
create and reinvent our product offerings and digital experiences to meet the needs of consumers. Our product offerings and brand continue to
gain traction in the marketplace, as demonstrated by industry recognition of our award-winning direct online bank and strong retention rates
of our customer base.

Our use of the term “loans” describes all of the products associated with our direct and indirect lending activities. The specific products
include loans, retail installment sales contracts, lines of credit, leases, and other financing products. The term “lend” or “originate” refers to
our direct origination of loans or our purchase or acquisition of loans.

For further details and information related to our business segments and the products and services they provide, refer to Management’s

Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in Part II, Item 7 of this report, and Note 27 to the
Consolidated Financial Statements.

Industry and Competition

The markets for automotive financing, insurance, banking (including corporate finance and mortgage finance), and brokerage are highly

competitive. We directly compete in the automotive financing market with banks, credit unions, captive automotive finance companies, and
independent finance companies. Our insurance business also faces significant competition from automotive manufacturers, captive

Ally Financial Inc. • Form 10-K

automotive finance companies, insurance carriers, third-party administrators, brokers, and other insurance-related companies. Some of these
competitors in automotive financing and insurance, such as captive automotive finance companies, have certain exclusivity privileges with
automotive manufacturers whose customers and dealers compose a significant portion of our customer base. In addition, our banking and
brokerage businesses face intense competition from banks, savings associations, finance companies, credit unions, mutual funds, investment
advisers, asset managers, brokerage firms, hedge funds, insurance companies, mortgage-banking companies, and credit card companies.
Financial-technology (fintech) companies also have been partnering more often with financial services providers to compete against us in
lending and other markets. Many of our competitors have substantial positions nationally or in the markets in which they operate. Some of our
competitors have lower cost structures, substantially lower costs of capital, and much less reliance on securitization, unsecured debt, and other
capital markets. Our competitors may be subject to different and, in some cases, less stringent legislative, regulatory, or supervisory regimes
than we are. A range of competitors differ from us in their strategic and tactical priorities and, for example, may be willing to suffer
meaningful financial losses in the pursuit of disruptive innovation or to accept more aggressive business, compliance, and other risks in the
pursuit of higher returns. Competition affects every aspect of our business, including product and service offerings, rates, pricing and fees,
and customer service. Successfully competing in our markets also depends on our ability to innovate, to invest in technology and
infrastructure, to maintain and enhance our reputation, and to attract, retain, and motivate talented employees, all the while effectively
managing expenses. We expect that competition will only intensify in the future.

Regulation and Supervision

We are subject to significant regulatory frameworks in the United States—at federal, state, and local levels—that affect the products and

services that we may offer and the manner in which we may offer them, the risks that we may take, the ways in which we may operate, and
the corporate and financial actions that we may take.

We are also subject to direct supervision and periodic examinations by various government agencies and industry self-regulatory
organizations that are charged with overseeing the kinds of business activities in which we engage, including the Board of Governors of the
Federal Reserve System (FRB), the Utah Department of Financial Institutions (UDFI), the Federal Deposit Insurance Corporation (FDIC), the
Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority
(FINRA), and a number of state regulatory and licensing authorities such as the New York Department of Financial Services (NYDFS). These
agencies and organizations generally have broad authority and discretion in restricting or otherwise affecting our businesses and operations
and may take formal or informal enforcement actions against us when, in the applicable agency’s or organization’s judgment, our businesses
or operations fail to comply with applicable law, comport with safe and sound practices, or meet its supervisory expectations.

This system of regulation, supervision, and examination is intended primarily for the protection and benefit of our depositors and other
customers, the FDIC’s Deposit Insurance Fund (DIF), the banking and financial systems as a whole, and the broader economy—and not for
the protection or benefit of our stockholders or non-deposit creditors. The scope, intensity, and focus of this system can vary from time to time
for reasons that range from the state of the economic and political environments to the performance of our businesses and operations, but for
the foreseeable future, we expect to remain subject to extensive regulation, supervision, and examinations.

This section summarizes some relevant provisions of the principal statutes, regulations, and other laws that apply to us. The descriptions,

however, are not complete and are qualified in their entirety by the full text and judicial or administrative interpretations of those laws and
other laws that affect us.

Bank Holding Company, Financial Holding Company, and Depository Institution Status

Ally and IB Finance Holding Company, LLC (IB Finance) are BHCs under the BHC Act. Ally is also an FHC under the GLB Act.
IB Finance is a direct subsidiary of Ally and the direct holding company for 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 (FDI Act). As BHCs, Ally
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.

•

Permitted Activities — Under the BHC Act, BHCs and their subsidiaries are generally limited to the business of banking and to
closely related activities that are incident to banking. The GLB Act amended the BHC Act and provided a regulatory framework
applicable to FHCs, which are BHCs that meet certain qualifications and elect FHC status. FHCs, directly or indirectly through their
subsidiaries, are generally permitted to engage in a broader range of financial and related activities than those that are permissible
for BHCs—for example, (1) underwriting, dealing in, and making a market in securities; (2) providing financial, investment, or
economic advisory services; (3) underwriting insurance; and (4) merchant banking activities. The FRB regulates, supervises, and
examines FHCs, as it does all BHCs, but insurance and securities activities conducted by an FHC or its nonbank subsidiaries are
also regulated, supervised, and examined by functional regulators such as state insurance commissioners, the SEC, or FINRA.
Ally’s status as an FHC allows us to provide insurance products and services, operate our SmartAuction vehicle remarketing
services for third parties, and offer a range of brokerage services. To remain eligible to conduct these broader financial and related
activities, Ally and Ally Bank must remain “well-capitalized” and “well-managed” as defined under applicable law. Refer to Note
21 to the Consolidated Financial Statements and the section below titled Basel Capital Frameworks for additional information. In
addition, our ability to expand these financial and related activities or make acquisitions generally requires that we achieve a
satisfactory or better rating under the Community Reinvestment Act (CRA). Further, under the BHC Act, Ally generally may not
directly or indirectly acquire control of more than 5% of any class of voting securities of any unaffiliated bank or BHC without first
obtaining FRB approval.

Ally Financial Inc. • Form 10-K

•

Enhanced Prudential Standards — Ally is subject to the enhanced prudential standards that have been established by the FRB for
BHCs with total consolidated assets of $50 billion or more as required or authorized under the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank Act). Among other things, the enhanced prudential standards require Ally to
maintain a buffer of unencumbered highly liquid assets to meet projected net cash outflows for 30 days over the range of liquidity
stress scenarios used in internal stress tests and to comply with a number of risk management and governance requirements,
including liquidity risk management standards. The enhanced prudential standards also compel Ally to engage in capital planning,
stress testing, and resolution planning, all of which are further described later in this section. The FRB has reproposed but not yet
finalized a rule that would subject Ally to single-counterparty credit limits and is still developing a reproposed rule that would
subject Ally to an early-remediation framework. Further, under the Dodd-Frank Act, the FRB remains empowered to adopt
additional enhanced prudential standards that in its judgment are appropriate, including limits on short-term debt. All the while,
Congress continues to formally and informally deliberate on legislative proposals that could alter the scope or applicability of the
enhanced prudential standards to Ally.

Liquidity Coverage Ratio Requirements — The FRB and other U.S. banking agencies have adopted a liquidity coverage ratio
(LCR) that is consistent with international standards developed by the Basel Committee on Banking Supervision (Basel
Committee). The LCR complements the enhanced prudential standards for managing liquidity risk and establishes a minimum
quantitative ratio of high-quality liquid assets to total net cash outflows over a prospective 30 calendar-day period, applicable to
BHCs with $250 billion or more in total consolidated assets or $10 billion or more in foreign exposures. Ally is subject to a
modified and less stringent version of the LCR that applies to BHCs with $50 billion or more but less than $250 billion in total
consolidated assets and less than $10 billion of foreign exposures. Ally is required to calculate its LCR on a monthly basis and,
beginning in 2017, became subject to a minimum LCR of 100%. In addition, beginning October 1, 2018, Ally will be required to
comply with LCR public disclosure obligations—as prescribed by the FRB—which include quantitative information about its LCR
calculation and a qualitative discussion of the factors that have a significant effect on its LCR.

Capital Adequacy Requirements — Ally and Ally Bank are subject to various capital adequacy requirements. Refer to Note 21 to
the Consolidated Financial Statements and the section below titled Basel Capital Frameworks for additional information.

Capital Planning and Stress Tests — The FRB has adopted capital planning and stress testing requirements for large and
noncomplex BHCs with total consolidated assets between $50 billion and $250 billion and total nonbank assets of less than $75
billion. As part of these enhanced prudential standards, Ally is subject to supervisory and company-run stress tests and must submit
a proposed capital plan to the FRB annually in connection with its Comprehensive Capital Analysis and Review (CCAR) process.
The proposed capital plan must include an assessment of our expected uses and sources of capital and a description of all planned
capital actions over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any dividend or
other capital distribution, and any similar action that the FRB determines could have an impact on Ally’s capital. The proposed
capital plan must also include a discussion of how Ally, under expected and stressful conditions, will maintain capital
commensurate with its risks and above the minimum regulatory capital ratios and serve as a source of strength to Ally Bank. The
FRB will either object to Ally’s proposed capital plan, in whole or in part, or provide a notice of non-objection. If the FRB objects
to the proposed capital plan, or if certain material events occur after approval of the plan, Ally must submit a revised capital plan
within 30 days.

Ally received a non-objection to its 2017 capital plan. Ally expects to submit its 2018 capital plan by April 5, 2018, with a

response expected from the FRB by June 30, 2018.

In the CCAR process, the FRB’s quantitative assessment of Ally’s proposed capital plan is based on the results of Ally’s
company-run stress tests and the FRB’s estimate of Ally’s post-stress capital ratios under the supervisory stress tests. Pursuant to the
Dodd-Frank Act, the FRB requires Ally to conduct semi-annual (annual and mid-cycle) company-run stress tests under baseline,
adverse, and severely adverse economic scenarios over a nine-quarter planning horizon. For the 2017 stress testing cycle, Ally
submitted the results of its semi-annual stress tests to the FRB in April and October 2017. Ally expects to submit its 2018 company-
run stress tests by April 5, 2018, and October 5, 2018.

In January 2017, the FRB amended the capital planning and stress testing rules, effective for the 2017 cycle and beyond. As a
result of this amendment, the FRB may no longer object to the capital plan of a large and noncomplex BHC, like Ally, on the basis
of qualitative deficiencies in its capital planning process. Instead, the qualitative assessment of Ally’s capital planning process is
now conducted outside of CCAR through the supervisory review process. The amendment also decreased the de minimis threshold
for the amount of capital that Ally could distribute to stockholders outside of an approved capital plan without seeking prior
approval of the FRB, and modified Ally’s reporting requirements to reduce unnecessary burdens.

The FRB publishes summary quantitative results of the supervisory stress tests of each large and noncomplex BHC, like Ally,
ordinarily in June in connection with the culmination of the CCAR process. Additionally, we publicly disclose summary results of
each company-run stress test under the severely adverse economic scenario in accordance with regulatory requirements. In 2017,
we disclosed the summary results of our annual stress test on June 23, 2017, and the summary results of our mid-cycle stress test on
October 5, 2017.

Ally Financial Inc. • Form 10-K

•

Resolution Planning — As a BHC with total consolidated assets of $50 billion or more, Ally is required to submit annually to the
FRB and the FDIC a plan (commonly known as a living will) for the rapid and orderly resolution of Ally and its significant legal
entities under the U.S. Bankruptcy Code and other applicable insolvency laws in the event of future material financial distress or
failure. If the FRB and the FDIC jointly determine that the resolution plan is not credible and the deficiencies are not adequately
remedied in a timely manner, they may jointly impose on us more stringent capital, leverage, or liquidity requirements or
restrictions on our growth, activities, or operations. Further, if we were to fail to address any deficiencies in our resolution plan
when required, we could eventually be compelled to divest specified assets or operations. Ally submitted its most recent resolution
plan to the FRB and the FDIC in December 2017. In addition, Ally Bank is required to periodically submit to the FDIC a separate
resolution plan, which is similarly assessed for its credibility. Ally Bank’s next resolution plan must be submitted to the FDIC by
July 1, 2018. The public versions of the resolution plans previously submitted by Ally and Ally Bank are available on the FRB’s and
the FDIC’s websites.

Limitations on Bank and Bank Holding Company Dividends and Other Capital Distributions — Federal and Utah law place a
number of conditions, restrictions, and limitations on dividends and other capital distributions that may be paid by Ally Bank to IB
Finance and thus indirectly to Ally. In addition, even if the FRB does not object to our capital plan, Ally may be precluded from or
limited in paying dividends or other capital distributions without the FRB’s approval under certain circumstances—for example,
when we would not meet minimum regulatory capital ratios after giving effect to the distributions. FRB supervisory guidance also
requires BHCs such as Ally to consult with the FRB prior to increasing dividends, implementing common stock repurchase
programs, or redeeming or repurchasing capital instruments. Further, the U.S. banking agencies are authorized to prohibit an insured
depository institution, like Ally Bank, or a BHC, like Ally, from engaging in unsafe or unsound banking practices and, depending
upon the circumstances, could find that paying a dividend or other capital distribution would constitute an unsafe or unsound
banking practice.

Transactions with Affiliates — 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. Pursuant to these laws, “covered transactions”—including Ally
Bank’s extensions of credit to and asset purchases from its affiliates—are generally subject to meaningful restrictions. For example,
unless otherwise exempted, (1) covered transactions are limited to 10% of Ally Bank’s capital stock and surplus in the case of any
individual affiliate and 20% of Ally Bank’s capital stock and surplus in the case of all affiliates; (2) Ally Bank’s credit transactions
with an affiliate are generally subject to stringent collateralization requirements; (3) with few exceptions, Ally Bank may not
purchase any “low quality asset” from an affiliate; and (4) covered transactions must be conducted on terms and conditions that are
consistent with safe and sound banking practices (collectively, the Affiliate Transaction Restrictions). In addition, transactions
between Ally Bank and an affiliate must be on terms and conditions that are either substantially the same as or more beneficial to
Ally Bank than those prevailing at the time for comparable transactions with or involving nonaffiliates.

Furthermore, these laws include an attribution rule that treats a transaction between Ally Bank and a nonaffiliate as a

transaction between Ally Bank and an affiliate to the extent that the proceeds of the transaction are used for the benefit of or
transferred to the affiliate. Thus, Ally Bank’s purchase from a dealer of a retail installment sales contract involving a vehicle for
which Ally provided floorplan financing is subject to the Affiliate Transaction Restrictions because the purchase price paid by Ally
Bank is ultimately transferred by the dealer to Ally to pay off the floorplan financing.

The Dodd-Frank Act tightened the Affiliate Transaction Restrictions in a number of ways. For example, the definition of

covered transactions was expanded to include credit exposures arising from derivatives transactions, securities lending and
borrowing transactions, and the acceptance of affiliate-issued debt obligations (other than securities) as collateral. For a credit
transaction that must be collateralized, the Dodd-Frank Act also requires that collateral be maintained at all times while the credit
extension or credit exposure remains outstanding and places additional limits on acceptable collateral.

Source of Strength — The Dodd-Frank Act codified the FRB’s policy requiring a BHC, like Ally, to serve as a source of financial
strength for a depository institution subsidiary, like Ally Bank, and to commit resources to support the subsidiary in circumstances
when Ally might not otherwise elect to do so. This commitment is also reflected in Ally Bank’s application for membership in the
Federal Reserve System, as described in Note 21 to the Consolidated Financial Statements. The functional regulator of any nonbank
subsidiary of Ally, however, may prevent that subsidiary from directly or indirectly contributing its financial support, and if that
were to preclude Ally from serving as an adequate source of financial strength, the FRB may instead require the divestiture of Ally
Bank and impose operating restrictions pending such a divestiture.

Single Point of Entry Resolution Authority — Under the Dodd-Frank Act, a BHC whose failure would have serious adverse effects
on the financial stability of the United States may be subjected to an FDIC-administered resolution regime called the orderly
liquidation authority as an alternative to bankruptcy. If Ally were to be placed into receivership under the orderly liquidation
authority, the FDIC as receiver would have considerable rights and powers in liquidating and winding up Ally, including the ability
to assign assets and liabilities without the need for creditor consent or prior court review and the ability to differentiate and
determine priority among creditors. In doing so, moreover, the FDIC’s primary goal would be a liquidation that mitigates risk to the
financial stability of the United States and that minimizes moral hazard. In December 2013, the FDIC released its proposed Single
Point of Entry strategy for the resolution of a systemically important financial institution under the orderly liquidation authority.
Under this strategy, the FDIC would place the top-tier U.S. holding company in receivership, keep its operating subsidiaries open

Ally Financial Inc. • Form 10-K

and out of insolvency proceedings by transferring them to a new bridge holding company imposing losses on the stockholders and
creditors of the holding company in receivership according to their statutory order of priority, and addressing the problems that led
to the institution’s failure.

•

Enforcement Authority — The FRB possesses extensive authorities and powers to regulate and supervise the conduct of Ally’s
businesses and operations. If the FRB were to take the position that Ally or any of its subsidiaries have violated any law or
commitment or engaged in any unsafe or unsound practice, formal or informal corrective or enforcement actions could be taken by
the FRB against Ally, its subsidiaries, and institution-affiliated parties (such as directors, officers, and agents). The UDFI and the
FDIC have similarly expansive authorities and powers over Ally Bank and its subsidiaries. For example, these government
authorities could order us to cease and desist from engaging in specified activities or practices or could affirmatively compel us to
correct specified violations or practices. Some or all of these government authorities also would have the power, as applicable, to
issue administrative orders against us that can be judicially enforced; direct us to increase capital and liquidity; limit our dividends
and other capital distributions; restrict or redirect the growth of our assets, businesses, and operations; assess civil money penalties
against us; remove our officers and directors; require the divestiture or the retention of assets or entities; terminate deposit
insurance; or force us into bankruptcy, conservatorship, or receivership. These actions could directly affect not only Ally, its
subsidiaries, and institution-affiliated parties but also Ally’s counterparties, stockholders, and creditors and its commitments,
arrangements, or other dealings with them.

In addition, the CFPB has broad authorities and powers to enforce federal consumer protection laws involving financial

products and services. The CFPB has exercised these authorities and powers through public enforcement actions, lawsuits, and
consent orders and through nonpublic enforcement actions. In doing so, the CFPB has generally sought remediation of harm alleged
to have been suffered by consumers, civil money penalties, and changes in practices and other conduct.

The SEC, FINRA, the Department of Justice, state attorneys general, and other domestic or foreign government authorities

also have an array of means at their disposal to regulate and enforce matters within their jurisdiction that could impact Ally’s
businesses and operations.

Basel Capital Framework

The FRB and other U.S. banking agencies have adopted risk-based and leverage capital standards that establish minimum capital-to-

asset ratios for BHCs, like Ally, and depository institutions, like Ally Bank.

The risk-based capital ratios are based on a banking organization’s risk-weighted assets (RWAs), which are generally determined under

the standardized approach applicable to Ally and Ally Bank by (1) assigning on-balance sheet exposures to broad risk weight categories
according to the counterparty or, if relevant, the guarantor or collateral (with higher risk weights assigned to categories of exposures perceived
as representing greater risk), and (2) multiplying off-balance sheet exposures by specified credit conversion factors to calculate credit
equivalent amounts and assigning those credit equivalent amounts to the relevant risk weight categories. The leverage ratio, in contrast, is
based on an institution’s average unweighted on-balance sheet exposures.

Until January 1, 2015, the U.S. risk-based and leverage capital standards applicable to Ally and Ally Bank were based on the Basel I
capital accord promulgated by the Basel Committee in 1989 (U.S. Basel I). Ally and Ally Bank were required to maintain, under U.S. Basel I,
a minimum Tier 1 risk-based capital ratio of Tier 1 capital to RWAs of 4%, a minimum total risk-based capital ratio of total qualifying capital
to RWAs of 8%, and a minimum Tier 1 leverage ratio of Tier 1 capital to average on-balance-sheet exposures of 4%.

In December 2010, the Basel Committee reached an agreement on the global Basel III capital framework, which was designed to
increase the quality and quantity of regulatory capital by introducing new risk-based and leverage capital standards. In July 2013, the U.S.
banking agencies finalized rules implementing the Basel III capital framework in the United States as well as related provisions of the Dodd-
Frank Act (U.S. Basel III). U.S. Basel III represents a substantial revision to the previously effective regulatory capital standards for U.S.
banking organizations. We became subject to U.S. Basel III on January 1, 2015, although a number of its provisions—including capital
buffers and certain regulatory capital deductions—are subject to a phase-in period through December 31, 2018.

Under U.S. Basel III, Ally and Ally Bank must maintain a minimum Common Equity Tier 1 risk-based capital ratio of 4.5%, a minimum

Tier 1 risk-based capital ratio of 6%, and a minimum total risk-based capital ratio of 8%. In addition to these minimum risk-based capital
ratios, Ally and Ally Bank are also subject to a Common Equity Tier 1 capital conservation buffer of more than 2.5%, subject to a phase-in
period from January 1, 2016, through December 31, 2018. Failure to maintain the full amount of the buffer would result in restrictions on the
ability of Ally and Ally Bank to make capital distributions, including dividend payments and stock repurchases and redemptions, and to pay
discretionary bonuses to executive officers. U.S. Basel III also subjects Ally and Ally Bank to a minimum Tier 1 leverage ratio of 4%.

U.S. Basel III also revised the eligibility criteria for regulatory capital instruments and provides for the phase-out of instruments that had

previously been recognized as capital but that do not satisfy these criteria. For example, subject to certain exceptions (e.g., certain debt or
equity issued to the U.S. government under the Emergency Economic Stabilization Act), trust preferred and other hybrid securities were
excluded from a BHC’s Tier 1 capital as of January 1, 2016. Also, subject to a phase-in schedule, certain items are deducted from Common
Equity Tier 1 capital under U.S. Basel III that had not previously been deducted from regulatory capital, and certain other deductions from
regulatory capital have been modified. Among other things, U.S. Basel III requires significant investments in the common stock of
unconsolidated financial institutions, mortgage servicing assets, and certain deferred tax assets (DTAs) that exceed specified individual and

Ally Financial Inc. • Form 10-K

aggregate thresholds to be deducted from Common Equity Tier 1 capital. U.S. Basel III also revised the standardized approach for calculating
RWAs by, among other things, modifying certain risk weights and the methods for calculating RWAs for certain types of assets and exposures.

Ally and Ally Bank are subject to the U.S. Basel III standardized approach for counterparty credit risk but not to the U.S. Basel III
advanced approaches for credit risk or operational risk. Ally is also not subject to the U.S. market risk capital rule, which applies only to
banking organizations with significant trading assets and liabilities.

On November 21, 2017, the FRB and other U.S. banking agencies finalized a rule that extends the period for applying existing capital

requirements to a targeted set of items that are subject to transition provisions under U.S. Basel III. Specifically, the rule indefinitely
postpones certain remaining phase-in requirements for capital deductions and adjustments for investments in unconsolidated financial
institutions, mortgage servicing assets, and certain DTAs, none of which have a material impact on our regulatory capital position. In addition,
on September 27, 2017, the FRB and other U.S. banking agencies released a proposal to simplify certain capital requirements, including the
requirements related to the above-mentioned capital deductions and adjustments. The simplification proposal primarily applies to non-
advanced approaches banking organizations such as Ally and Ally Bank. We are evaluating the effect that this proposal would have on our
regulatory capital position, but we do not expect this will have a material impact on our regulatory capital position. In December 2017, the
Basel Committee approved revisions to the global Basel III capital framework (commonly known as Basel IV), many of which—if adopted in
the United States—could heighten regulatory capital standards even more. How all of these proposals and revisions will be harmonized and
finalized in the United States is not clear or predictable.

The capital-to-asset ratios play a central role in prompt corrective action (PCA), which is an enforcement framework used by the U.S.
banking agencies to constrain the activities of depository institutions based on their levels of regulatory capital. Five categories have been
established using thresholds for the Common Equity Tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio, the total risk-based
capital ratio, and the leverage ratio: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) generally prohibits a depository institution
from making any capital distribution, including any payment of a cash dividend or a management fee to its BHC, if the depository institution
would become undercapitalized after the distribution. An undercapitalized institution is also subject to growth limitations and must submit
and fulfill a capital restoration plan. While BHCs are not subject to the PCA framework, the FRB is empowered to compel a BHC to take
measures—such as the execution of financial or performance guarantees—when PCA is required in connection with one of its depository
institution subsidiaries. In addition, under FDICIA, only well-capitalized and adequately capitalized institutions may accept brokered
deposits, and even adequately capitalized institutions are subject to some restrictions on the rates they may offer for brokered deposits. At
December 31, 2017, Ally Bank was well capitalized under the PCA framework.

At December 31, 2017, Ally and Ally Bank were in compliance with their regulatory capital requirements. For an additional discussion

of capital adequacy requirements, refer to Note 21 to the Consolidated Financial Statements.

Insured Depository Institution Status

Ally Bank is required to file periodic reports with the FDIC concerning its financial condition. Total assets of Ally Bank were $137.4

billion and $123.5 billion at December 31, 2017, and 2016, respectively.

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. Deposit insurance is funded through assessments on Ally Bank and other insured depository institutions, and the
FDIC may take action to increase insurance premiums if the DIF is not funded to its regulatory mandated Designated Reserve Ratio (DRR).
Currently, the FDIC is mandated to achieve a DRR of 1.35% by September 30, 2020, and has established a target DRR of 2.0%. Under the
Dodd-Frank Act, the FDIC assesses premiums from each institution based on its average consolidated total assets minus its average tangible
equity, and a scorecard method is utilized to determine each institution’s risk to the DIF. The Dodd-Frank Act also requires the FDIC, in
setting assessments, to offset the effect of increasing its reserve for the DIF on institutions with consolidated assets of less than $10 billion. To
achieve the mandated DRR consistent with these provisions of the Dodd-Frank Act, the FDIC implemented a rule in 2016 imposing a
surcharge of 4.5 basis points on all insured depository institutions with assets of $10 billion or more in addition to their regular assessments;
under the rule, the surcharge would cease once the DIF achieves the 1.35% DRR or on December 31, 2018, whichever comes first—although
the FDIC indicated that it would impose a shortfall assessment in 2019 if the DIF has not achieved the 1.35% DRR by December 31, 2018.

If an insured depository institution like Ally Bank were to become insolvent or if other specified events were to occur relating to its
financial condition or the propriety of its actions, the FDIC may be appointed as conservator or receiver for the institution. In that capacity,
the FDIC would have the power (1) to transfer assets and liabilities of the institution to another person or entity without the approval of the
institution’s creditors; (2) to require that its claims process be followed and to enforce statutory or other limits on damages claimed by the
institution’s creditors; (3) to enforce the institution’s contracts or leases according to their terms; (4) to repudiate or disaffirm the institution’s
contracts or leases; (5) to seek to reclaim, recover, or recharacterize transfers of the institution’s assets or to exercise control over assets in
which the institution may claim an interest; (6) to enforce statutory or other injunctions; and (7) to exercise a wide range of other rights,
powers, and authorities, including those that could impair the rights and interests of all or some of the institution’s creditors. In addition, the
administrative expenses of the conservator or receiver could be afforded priority over all or some of the claims of the institution’s creditors,
and under the FDI Act, the claims of depositors (including the FDIC as subrogee of depositors) would enjoy priority over the claims of the
institution’s unsecured creditors.

Ally Financial Inc. • Form 10-K

Consumer Financial Laws

Ally and Ally Bank are subject to regulation, supervision, and examination by the CFPB with respect to federal consumer protection
laws involving financial products and services. The Dodd-Frank Act also empowers state attorneys general and other state officials to enforce
federal consumer protection laws under specified conditions. Ally and Ally Bank are subject to a host of state consumer protections laws as
well.

• Mortgage Operations — Our mortgage business is subject to extensive federal, state, and local laws, in addition to judicial and

administrative decisions that impose requirements and restrictions on this business. The federal, state, and local laws to which our
mortgage business is subject, among other things, impose licensing obligations and financial requirements; limit the interest rates,
finance charges, and other fees that can be charged; regulate the use of credit reports and the reporting of credit information; impose
underwriting requirements; regulate marketing techniques and practices; require the safeguarding of nonpublic information about
customers; and regulate servicing practices, including the assessment, collection, foreclosure, claims handling, and investment and
interest payments on escrow accounts.

Through our direct-to-consumer mortgage offering, we offer a variety of jumbo and conforming fixed- and adjustable-rate
mortgage products with the assistance of a third-party fulfillment partner. Jumbo mortgage loans are generally held on our balance
sheet and are accounted for as held-for-investment. Conforming mortgage loans are generally originated as held-for-sale and then
sold to the fulfillment partner, which in turn may sell the loans to the Federal National Mortgage Association (Fannie Mae), the
Federal Home Loan Mortgage Corporation (Freddie Mac), or other participants in the secondary mortgage market. The nature and
dynamics of this market, however, continue to evolve in the wake of the economic crisis that began in 2007–2008 and the role of
Fannie Mae and Freddie Mac in it remains subject to uncertainty.

•

Automotive Lending Business — In March 2013, the CFPB issued guidance about compliance with the fair lending requirements
of the Equal Credit Opportunity Act and Regulation B. The guidance is specific to the practice of indirect automotive finance
companies purchasing financing contracts executed between dealers and consumers and paying dealers for the contracts at a
discount below the rates dealers charge consumers. In December 2017, the Government Accountability Office (GAO) determined
that the CFPB’s guidance constitutes a rule under the Congressional Review Act, which requires the CFPB to take certain steps to
make the guidance effective. With the GAO’s determination, the future of the guidance is uncertain at this time.

Asset-backed Securitizations

Section 941 of the Dodd-Frank Act requires securitizers of different types of asset-backed securitizations, including transactions backed
by residential mortgages, commercial mortgages, and commercial, credit card, and automotive loans, to retain no less than five percent of the
credit risk of the assets being securitized, with an exemption for securitizations that are wholly composed of “qualified residential
mortgages” (QRMs). Federal regulators issued final rules implementing this Dodd-Frank Act requirement in October 2014. The final rules
aligned the definition of QRMs with the CFPB’s definition of “Qualified Mortgage” and also included an exemption for the mortgage-backed
securities (MBS) of Government-sponsored Enterprises. The regulations took effect on February 23, 2015. Compliance was required with
respect to securitization transactions backed by residential mortgages beginning December 24, 2015, and with respect to securitization
transactions backed by other types of assets beginning December 24, 2016. Ally Bank has complied with the FDIC’s Safe Harbor Rule
requiring it to retain five percent risk retention in retail automotive loan and lease securitizations. Ally has complied with the risk retention
rules for automotive asset-backed securitizations, which became effective on December 24, 2016.

Insurance Companies

Certain of our Insurance operations are subject to certain minimum aggregate capital requirements, net asset and dividend restrictions
under applicable state and foreign insurance laws, and the rules and regulations promulgated by various U.S. and foreign regulatory agencies.
Under various state and foreign insurance regulations, dividend distributions may be made only from statutory unassigned surplus with
approvals required from the regulatory authorities for dividends in excess of certain statutory limitations. Our insurance operations are also
subject to applicable state laws generally governing insurance companies, as well as laws and regulations for products that are not regulated
as insurance, such as vehicle service contracts (VSCs) and guaranteed asset protection (GAP) waivers.

Investments in Ally

Because Ally Bank is a FDIC-insured bank and Ally and IB Finance are BHCs, acquisitions of our voting stock above certain thresholds

may be subject to regulatory approval or notice under federal or state law. Investors are responsible for ensuring that they do not, directly or
indirectly, acquire shares of our stock in excess of the amount that may be acquired without regulatory approval under the Change in Bank
Control Act, the BHC Act, and Utah state law.

Ally Invest Subsidiaries

As discussed below, we acquired 100% of the equity of TradeKing Group, Inc., which we later renamed Ally Invest Group Inc. (Ally

Invest), on June 1, 2016. As a result of the acquisition and rebranding, Ally Invest Securities LLC (Ally Invest Securities), Ally Invest Forex
LLC (Ally Invest Forex), Ally Invest Futures LLC (Ally Invest Futures), Ally Invest Advisors Inc. (Ally Invest Advisors), and TKconnect
LLC are now indirect wholly-owned subsidiaries of Ally.

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,

Ally Financial Inc. • Form 10-K

Securities Investor Protection Corporation (SIPC) and various other self-regulatory organizations (SROs), including BATS BYX Exchange,
BATS BZX Exchange, NYSE Arca, and Nasdaq Stock Market. As a result, Ally Invest Securities and its personnel are subject to extensive
regulatory requirements under the Exchange Act, SEC regulations and SRO rules covering all aspects of the firm’s securities activities,
including, for example, sales and trading practices, capital adequacy, recordkeeping, privacy, anti-money laundering, financial and other
reporting, supervision, misuse of material nonpublic information, conducting its business in accordance with just and equitable principles of
trade, and personnel qualifications. The firm operates as an introducing broker and clears all transactions, including all customer transactions,
through a third-party clearing broker-dealer on a fully disclosed basis.

Ally Invest Forex and Ally Invest Futures are each registered with the U.S. Commodity Futures Trading Commission (CFTC) as

introducing brokers and are members of the National Futures Association (NFA), which is the primary SRO for the U.S. futures industry. Both
firms are subject to regulatory requirements governing introducing brokers and their personnel under the Commodity Exchange Act and
CFTC and NFA rules. In addition, Ally Invest Forex (but not Ally Invest Futures) is subject to CFTC retail forex rules.

A subsidiary of Ally Invest is also registered as an investment adviser with the SEC. As a result, such subsidiary is subject to regulatory

requirements governing investment advisers and their personnel under the Investment Advisers Act of 1940, and the rules and regulations
promulgated thereunder, 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, Ally Invest Futures, and Ally Invest Advisors, and
regularly review reports that the firms are required to submit on an ongoing basis. Violations of relevant regulatory requirements could result
in adverse consequences for the firms and their personnel, including censure, penalties and fines, the issuance of cease-and-desist orders, and
restriction, suspension or expulsion from the securities industry and other adverse consequences.

Other Laws

Ally is subject to numerous federal, state, and local statutes, regulations, and other laws, and the possibility of violating applicable law

presents an ongoing risk to Ally. Some of the other more significant laws to which we are subject include:

•

Privacy — The GLB Act imposes additional obligations on us to safeguard the information we maintain on our customers, requires
us to provide notice of our privacy practices, and permits customers to “opt-out” of information sharing with unaffiliated parties.
The U.S. banking regulators and the Federal Trade Commission have issued regulations that establish obligations to safeguard
information. In addition, several states have enacted even more stringent privacy and safeguarding legislation. If a variety of
inconsistent state privacy rules or requirements are enacted, our compliance costs could increase substantially.

Volcker Rule — Under the Dodd-Frank Act and implementing regulations of the CFTC, FDIC, FRB, Office of the Comptroller of
the Currency and the SEC (the Volcker Rule), insured depository institutions and their affiliates are prohibited from (1) engaging in
“proprietary trading” and (2) investing in or sponsoring certain types of funds (covered funds) subject to certain limited exceptions.
The final rules contain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations
and also permit certain ownership interests in certain types of funds to be retained. They also permit the offering and sponsoring of
funds under certain conditions. In early 2017, the FRB granted us a five-year extension to conform with requirements related to
certain covered funds activities. The Volcker Rule imposes significant compliance and reporting obligations on banking entities.
The impact of the Volcker Rule is not expected to be material to Ally’s business operations.

Fair Lending Laws — The Equal Credit Opportunity Act, the Fair Housing Act, and similar fair-lending laws (collectively, Fair
Lending Laws) generally prohibit a lender from discriminating against a borrower in any aspect of a credit transaction on the basis
of specified characteristics known as “prohibited bases,” such as race, gender, and religion. In addition to outlawing discrimination
in credit on a prohibited basis, the Fair Lending Laws require lenders to follow a number of prescriptive rules, including rules
requiring the lender to make credit decisions promptly, to notify customers of adverse actions, and, in the case of mortgage lenders
of a certain size, to gather and make publicly available anonymized data and information about mortgage applicants and the lender’s
credit decisions. Ally, under the oversight of its Fair and Responsible Banking team, has established a comprehensive fair-lending
program that is designed to identify and mitigate fair-lending risk. The Fair Lending Laws, however, continue to be interpreted in
evolving ways and to evolve, however, Ally remains at risk of being accused of violating Fair Lending Laws.

Fair Credit Reporting Act — The Fair Credit Reporting Act regulates the use of credit reports and the reporting of information to
credit reporting agencies, and also provides a national legal standard for lenders to share information with affiliates and certain third
parties and to provide firm offers of credit to consumers. In late 2003, the Fair and Accurate Credit Transactions Act was enacted,
making this preemption of conflicting state and local law permanent. The Fair Credit Reporting Act was also amended to place
further restrictions on the use of information shared between affiliates, to provide new disclosures to consumers when risk-based
pricing is used in the credit decision, and to help protect consumers from identity theft. All of these provisions impose additional
regulatory and compliance costs on us and reduce the effectiveness of our marketing programs.

Truth in Lending Act — The Truth in Lending Act (TILA), as amended, and Regulation Z, which implements TILA, requires
lenders to provide borrowers with uniform, understandable information concerning terms and conditions in certain credit
transactions. These rules apply to Ally and its subsidiaries in transactions in which they extend credit to consumers and require, in
the case of certain mortgage and automotive financing transactions, conspicuous disclosure of the finance charge and annual
percentage rate, if any. In addition, if an advertisement for credit states specific credit terms, Regulation Z requires that such

Ally Financial Inc. • Form 10-K

advertisement state only those terms that actually are or will be arranged or offered by the creditor. The CFPB has issued substantial
amendments to the mortgage requirements under Regulation Z, and additional changes are likely in the future. Amendments to
Regulation Z and Regulation X, which implements the Real Estate Settlement Procedures Act, require integrated mortgage loan
disclosures to be provided for applications received on or after October 3, 2015. Failure to comply with TILA can result in liability
for damages as well as criminal and civil penalties.

•

Sarbanes-Oxley Act — The Sarbanes-Oxley Act of 2002 implemented a broad range of corporate governance and accounting
measures designed to promote honesty and transparency in corporate America. The principal provisions of the act include, among
other things, (1) the creation of an independent accounting oversight board; (2) auditor independence provisions that restrict non-
audit services that accountants may provide to their audit clients; (3) additional corporate governance and responsibility measures
including the requirement that the principal executive and financial officers certify financial statements; (4) the potential forfeiture
of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers
in the twelve-month period following initial publication of any financial statements that later require restatement; (5) an increase in
the oversight and enhancement of certain requirements relating to audit committees and how they interact with the independent
auditors; (6) requirements that audit committee members must be independent and are barred from accepting consulting, advisory,
or other compensatory fees from the issuer; (7) requirements that companies disclose whether at least one member of the audit
committee is a “financial expert” (as defined by the SEC) and, if not, why the audit committee does not have a financial expert;
(8) a prohibition on personal loans to directors and officers, except certain loans made by insured financial institutions, on
nonpreferential terms and in compliance with other bank regulatory requirements; (9) disclosure of a code of ethics;
(10) requirements that management assess the effectiveness of internal control over financial reporting and that the independent
registered public accounting firm attest to the assessment; and (11) a range of enhanced penalties for fraud and other violations.

• USA PATRIOT Act/Anti-Money-Laundering Requirements — In 2001, the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) was signed into law. Title III of the
USA PATRIOT Act amends the Bank Secrecy Act and contains provisions designed to detect and prevent the use of the
U.S. financial system for money laundering and terrorist financing activities. The Bank Secrecy Act, as amended by the USA
PATRIOT Act, requires banks, certain other financial institutions, and, in certain cases, BHCs to undertake activities including
maintaining an anti-money-laundering program, verifying the identity of clients, monitoring for and reporting on suspicious
transactions, reporting on cash transactions exceeding specified thresholds, and responding to certain requests for information by
regulatory authorities and law enforcement agencies. We have implemented internal practices, procedures, and controls designed to
comply with these anti-money-laundering requirements.

•

Community Reinvestment Act — Under the CRA, a bank has a continuing and affirmative obligation, consistent with the safe and
sound operation of the institution, to help meet the credit needs of its entire community, including low- and moderate-income
persons and neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions.
However, institutions are rated on their performance in meeting the needs of their communities. Ally Bank filed its three-year CRA
Strategic Plan with the FRB in October 2016, and received approval in November 2016. In addition, in 2017, Ally Bank received an
“Outstanding” rating in its most recent CRA performance evaluation. Failure by Ally Bank to maintain a “Satisfactory” or better
rating under the CRA may adversely affect our ability to expand our financial and related activities as an FHC or make acquisitions.

Employees

We had approximately 7,900 and 7,600 employees at December 31, 2017, and 2016, respectively.

Additional Information

The results of operations for each of our reportable operating segments and the products and services offered are contained in the
individual business operations sections of MD&A. Financial information related to reportable operating segments and geographic areas is
provided in Note 27 to the Consolidated Financial Statements.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K (and amendments to these
reports) are available on our internet website, free of charge, as soon as reasonably practicable after the reports are electronically filed with or
furnished to the SEC. These reports are available at www.ally.com/about/investor/sec-filings/. These reports can also be found on the SEC
website at www.sec.gov.

Item 1A. Risk Factors

We face many risks and uncertainties, any one or more of which could have a material adverse effect on our business, results of

operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment in Ally. We believe that
the most significant of these risks and uncertainties are described in this section, although we may be adversely affected by other risks or
uncertainties that are not presently known to us, that we have failed to appreciate, or that we currently consider immaterial. These risk factors
should be read in conjunction with the MD&A in Part II, Item 7 of this report, and the Consolidated Financial Statements and notes thereto.
This Annual Report on Form 10-K is qualified in its entirety by these risk factors.

Ally Financial Inc. • Form 10-K

Risks Related to Regulation and Supervision

The regulatory and supervisory environment in which we operate could have an adverse effect on our business, financial condition,

results of operations, and prospects.

We are subject to extensive regulatory frameworks and to direct supervision and periodic examinations by various government agencies

and industry self-regulatory organizations that are charged with overseeing the kinds of business activities in which we engage. These
regulatory and supervisory frameworks are designed to protect public or private interests—such as macroeconomic policy objectives,
financial-market stability and liquidity, and the confidence and security of depositors—that may not always be aligned with those of our
stockholders or non-deposit creditors. Refer to the section above titled Regulation and Supervision in Part I, Item 1 of this report. In the last
decade, government scrutiny of the financial services industry has intensified, fundamental changes have been made to the banking,
securities, and other laws that govern financial services, and a multitude of related business practices have been altered. While the scope,
intensity, and focus of government oversight can vary from time to time, we expect to continue devoting substantial time and resources to risk
management, compliance, regulatory change management, and cybersecurity and other technology initiatives, each of which may adversely
affect our ability to operate profitably or to pursue advantageous business opportunities.

Ally operates as an FHC, which permits us to engage in a number of financial and related activities—including securities, advisory,

insurance, and merchant-banking activities—beyond the business of banking. To remain eligible to do so, Ally and Ally Bank must remain
well capitalized and well managed as defined under applicable law. If Ally or Ally Bank were found not to be well capitalized or well
managed, we may be restricted from engaging in the broader range of financial and related activities permitted for FHCs and may be required
to discontinue these activities or even divest Ally Bank. In addition, if we fail to achieve a satisfactory or better rating under the CRA, our
ability to expand these financial and related activities or make acquisitions could be restricted.

In connection with their continuous supervision and examinations of us, the FRB, the UDFI, the CFPB, the SEC, FINRA, the NYDFS,

or other regulatory agencies may require changes in our business or operations. Such a requirement may be judicially enforceable or
impractical for us to contest, and if we are unable to implement or maintain the requirement in a timely and effective manner, we could
become subject to formal or informal supervisory actions, including memoranda of understanding, written agreements, cease-and-desist
orders, and prompt-corrective-action or safety-and-soundness directives. Supervisory actions could entail significant restrictions on our
existing business, our ability to develop new business, our flexibility in conducting operations, and our ability to pay dividends or utilize
capital. Supervisory actions also may result in the imposition of civil monetary penalties, the enforcement of supervisory requirements
through injunctions or other administrative or judicial orders, related litigation by private plaintiffs, damage to our reputation, and a loss of
investor confidence. We could be required as well to dispose of specified assets and liabilities within a prescribed period of time. As a result,
any supervisory action could have an adverse effect on our business, financial condition, results of operations, and prospects.

Our regulatory environment is not static. No assurance can be given that applicable statutes, regulations, or other laws will not be
amended or construed differently, that new laws will not be adopted, or that any of these laws will not be enforced more aggressively.
Changes in the regulatory environment could adversely affect us in substantial and unpredictable ways, including by limiting the types of
financial services and products we may offer, enhancing the ability of others to offer more competitive financial services and products,
restricting our ability to make acquisitions or pursue other profitable opportunities, and negatively impacting our financial condition and
results of operations. Further, noncompliance with applicable laws could result in the suspension or revocation of licenses or registrations that
we need to operate and in the initiation of supervisory actions or private litigation.

Our ability to execute our business strategy for Ally Bank may be adversely affected by regulatory constraints.

A primary component of our business strategy is the continued growth of Ally Bank. This growth includes amassing a higher level of
retail deposits, expanding our commercial lending, and originating increased volumes of consumer products such as residential mortgage
loans. If our regulatory agencies raise concerns about any aspect of our business strategy for Ally Bank or the way in which we implement it
—including any associated affiliate transactions that are governed and constrained by Sections 23A and 23B of the Federal Reserve Act—we
may be obliged to limit or even reverse the growth of Ally Bank or otherwise alter our strategy, which could have an adverse effect on our
business, financial condition, results of operations, or prospects. In addition, if we are compelled to retain or shift any of our business
activities in or to nonbank affiliates, our funding costs for those activities—such as unsecured funding in the capital markets—could be more
expensive than our cost of funds at Ally Bank.

We are subject to stress tests, capital and liquidity planning, and other enhanced prudential standards, which impose significant

restrictions and costly requirements on our business and operations.

We are subject to the enhanced prudential standards that have been established by the FRB for BHCs with total consolidated assets of

$50 billion or more, including capital planning requirements for large and noncomplex BHCs with total consolidated assets between $50
billion and $250 billion and total nonbank assets of less than $75 billion. As part of these enhanced prudential standards, Ally is subject to
supervisory and company-run stress tests and must submit a proposed capital plan to the FRB annually in connection with its CCAR process.
Refer to the section above titled Regulation and Supervision in Part I, Item 1 of this report. The proposed capital plan must include an
assessment of our expected uses and sources of capital and a description of all planned capital actions over a nine-quarter planning horizon,
including any issuance of a debt or equity capital instrument, any dividend or other capital distribution, and any similar action that the FRB
determines could have an impact on Ally’s capital. The proposed capital plan must also include a discussion of how Ally, under expected and
stressful conditions, will maintain capital commensurate with its risks and above the minimum regulatory capital ratios and serve as a source

Ally Financial Inc. • Form 10-K

of strength to Ally Bank. The FRB will either object to the proposed capital plan, in whole or in part, or provide notice of non-objection to
Ally. The failure to receive a notice of non-objection from the FRB—whether due to how well our businesses and operations are forecasted to
perform, how capably we execute our capital planning process, how acutely the FRB projects severely adverse conditions to be, or otherwise
—may prohibit us from paying dividends, repurchasing our common stock, or making other capital distributions, may compel us to issue
capital instruments that could be dilutive to stockholders, may prevent us from maintaining or expanding lending or other business activities,
and may damage our reputation and result in a loss of investor confidence.

We may be required to raise capital as well if we are at risk of failing to satisfy our minimum regulatory capital ratios or other related
supervisory requirements, whether due to inadequate operating results that erode capital, future growth that outpaces the accumulation of
capital through earnings, changes in regulatory capital standards, or otherwise. In addition, we may elect to raise capital for strategic reasons
even when not required to do so. Our ability to raise capital on favorable terms or at all will depend on general economic and market
conditions, which are outside of our control, and on our operating and financial performance. Accordingly, we cannot be assured of being able
to raise capital when needed or on favorable terms. An inability to raise capital when needed and on favorable terms could damage the
performance and value of our business, prompt supervisory actions, and harm our reputation, and if the condition were to persist for any
appreciable period of time, our viability as a going concern could be threatened. Further, if we are able to raise capital and do so by issuing
common stock or convertible securities, the ownership interest of our existing stockholders could be diluted, and the market price of our
common stock could decline.

The enhanced prudential standards also require Ally to conduct liquidity stress tests and maintain a sufficient quantity of highly liquid

assets to survive a projected 30-day liquidity stress event, to adopt a contingency funding plan that would address liquidity needs during
various stress events, and to implement specified liquidity risk management and corporate governance measures. These enhanced liquidity
standards, together with a quantitative minimum liquidity coverage ratio that we must satisfy as a complement to these standards, could
constrain our ability to originate or invest in longer-term or less liquid assets or to take advantage of other profitable opportunities and,
therefore, may adversely affect our business, results of operations, and prospects.

Additionally, the FRB has proposed rules to implement other enhanced prudential standards mandated by Sections 165 and 166 of the
Dodd-Frank Act and related capital and liquidity requirements, including single-counterparty credit limits, an early remediation framework,
and a quantitative minimum net stable funding ratio. Once adopted and implemented, these rules also could adversely affect our business,
results of operations, financial condition, and prospects.

Our ability to rely on deposits as a part of our funding strategy may be limited.

Ally Bank is a key part of our funding strategy, and we place great reliance on deposits at Ally Bank as a source of funding. Competition

for deposits and deposit customers, however, is fierce and has only intensified with the implementation of enhanced capital and liquidity
requirements in the last decade. Ally Bank does not have a retail branch network but, instead, obtains its deposits through online and other
direct banking, from customers of Ally Invest, and through deposit brokers. Brokered deposits may be more price sensitive than other types of
deposits and may become less available if alternative investments offer higher returns. Brokered deposits totaled $15.2 billion at
December 31, 2017, which represented 16% of Ally Bank’s total deposits. In addition, our ability to maintain or grow direct banking deposits
may be constrained by our lack of in-person banking services, changes in consumer trends, or any loss of confidence in our brand. Our level
of deposits also could be adversely affected by regulatory or supervisory restrictions, including any applicable prior approval requirements or
limits on our offered rates or brokered deposit growth, and by changes in monetary or fiscal policies that influence deposit or other interest
rates. Perceptions of our financial strength, rates or returns offered by other financial institutions or third parties, and other competitive factors
beyond our control, including returns on alternative investments, will also impact the size of our deposit base.

The full impact of the Dodd-Frank Act and other financial-reform laws and policies on us remains unclear and unpredictable but could

have a further adverse effect on our business, results of operations, financial condition, or prospects.

The Dodd-Frank Act, which became law in July 2010, and other financial-reform laws and policies have substantially changed the legal
and supervisory frameworks under which we operate and have adversely affected our business, results of operations, and financial condition.
Refer to the section above titled Regulation and Supervision in Part I, Item 1 of this report. While much in the Dodd-Frank Act has been
implemented, some meaningful provisions remain subject to further rulemaking, transition periods, and the discretion of various regulatory
agencies. Even provisions that have been implemented are or may become the subject of interpretive disputes, litigation, proposed legislative
or regulatory amendments, or shifting supervisory priorities. For example, the CFPB—which was created by the Dodd-Frank Act—has
aggressively enforced its positions on a wide range of consumer protection laws that affect our business, including in the context of indirect
automotive lending. Some of these positions or their application in particular cases, however, have been contested by affected companies, as
has the constitutionality of the structure of the CFPB itself. The outcomes of these matters and their impact on both the meaning of consumer
protection laws and the enforcement powers and posture of the CFPB remain unclear and unpredictable but could adversely affect us. Recent
changes in leadership within the CFPB have added to this lack of clarity and predictability. Similarly, the full impact of the Dodd-Frank Act
and financial-reform laws and policies as whole on us cannot be predicted with any certainty and may not be known for a number of years,
but individually or collectively, they may have a further adverse effect on our business, results of operations, financial condition, or prospects.
In addition, these laws and policies may impact us differently than other financial institutions due to a number of factors, such as differences
in activities, size, risk profile, complexity, or regulatory or supervisory status.

Ally Financial Inc. • Form 10-K

Requirements under the U.S. Basel III rules to increase the quality and quantity of regulatory capital and future revisions to the Basel III

framework may adversely affect our business and financial results.

In December 2010, the Basel Committee reached an agreement on the global Basel III capital framework, which was designed to
increase the quality and quantity of regulatory capital by introducing new risk-based and leverage capital standards. In July 2013, the U.S.
banking agencies finalized rules implementing the Basel III capital framework in the United States as well as related provisions of the Dodd-
Frank Act. The U.S. Basel III rules represent substantial revisions to the previously effective regulatory capital standards for U.S. banking
organizations.

Ally and Ally Bank became subject to the U.S. Basel III rules on January 1, 2015, although a number of them—including new capital
buffers and regulatory capital deductions—are subject to phase-in through December 31, 2018. The U.S. Basel III rules subject Ally and Ally
Bank to higher minimum risk-based capital ratios and a capital conservation buffer above these minimum ratios. Failure to maintain the full
amount of the buffer would result in restrictions on our ability to make capital distributions, including dividend payments and stock
repurchases and redemptions, and to pay discretionary bonuses to executive officers. The U.S. Basel III rules also will, over time, impose
more stringent deductions for specified DTAs and other assets and limit our ability to meet regulatory capital requirements through the use of
trust preferred securities or other hybrid securities.

If Ally or Ally Bank were to fail to satisfy its regulatory capital requirements, significant regulatory sanctions could result, such as a bar

on acquisitions or new activities, a loss of our status as an FHC, informal or formal supervisory actions, or even resolution or receivership.
Any of these sanctions could have an adverse effect on our business, results of operations, financial condition, or prospects.

In December 2017, the Basel Committee approved revisions to the global Basel III capital framework (commonly known as Basel IV),
many of which—if adopted in the United States—could heighten regulatory capital standards even more. At the same time, the U.S. banking
agencies have proposed to simplify several elements of the U.S. Basel III rules. How these revisions and proposals will be harmonized and
finalized in the United States is not clear or predictable, and no assurance can be provided that they would not further impact our business,
results of operations, financial condition, or prospects in an adverse way.

Our business and financial results could be adversely affected by the political environment and governmental fiscal and monetary

policies.

A fractious or volatile political environment in the United States, including any related social unrest, could negatively impact business

and market conditions, economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of
which in turn could cause our business and financial results to suffer. In addition, disruptions in the foreign relations of the United States
could adversely affect the automotive and other industries on which our business depends and our tax positions and other dealings in foreign
countries.

Our business and financial results are also significantly affected by the fiscal and monetary policies of the U.S. government and its
agencies. We are particularly affected by the policies of the FRB, which regulates the supply of money and credit in the United States in
pursuit of maximum employment, stable prices, and moderate long-term interest rates. The FRB and its policies influence the availability and
demand for loans and deposits, the rates and other terms for loans and deposits, the conditions in equity, fixed-income, currency, and other
markets, and the value of securities and other financial instruments. Refer to the risk factor below, titled The levels of or changes in interest
rates could affect our results of operations and financial condition, for more information on how the FRB could affect interest rates. These
actions and policies, therefore, could adversely affect every facet of our business and operations—for example, the new and used vehicle
financing market, the cost of our deposits and other interest-bearing liabilities, and the yield on our earning assets. Tax and other fiscal
policies, moreover, impact not only general economic and market conditions but also give rise to incentives or disincentives that affect how
we and our customers prioritize objectives, deploy resources, and run households or operate businesses. For example, the Tax Cuts and Jobs
Act of 2017 (Tax Act) is expected to significantly affect these incentives and disincentives, including by revising corporate and individual tax
rates, altering the deductibility of net interest expense and capital outlays, and limiting the deductibility of state and local taxes as well as
interest on residential mortgage loans. The direct and indirect effects of the Tax Act on us and our customers have not yet been holistically
assessed, but changes in borrowing patterns, asset valuations, and other economic and market conditions could result and adversely impact
our business and financial results. Both the timing and the nature of any changes in monetary or fiscal policies, as well as their consequences
for the economy and the markets in which we operate, are beyond our control and difficult to predict but could adversely affect us.

If our ability to receive distributions from subsidiaries is restricted, we may not be able to satisfy our obligations to counterparties or

creditors, make dividend payments to stockholders, or repurchase our common stock.

Ally is a legal entity separate and distinct from its bank and nonbank subsidiaries and, in significant part, depends on dividend payments

and other distributions from those subsidiaries to fund its obligations to counterparties and creditors, its dividend payments to stockholders,
and its repurchases of common stock. Refer to the section above titled Regulation and Supervision in Part I, Item 1 of this report. Regulatory
or other legal restrictions, deterioration in a subsidiary’s performance, or investments in a subsidiary’s own growth may limit the ability of the
subsidiary to transfer funds freely to Ally. In particular, many of Ally’s subsidiaries are subject to laws that authorize their supervisory
agencies to block or reduce the flow of funds to Ally in certain situations. In addition, if any subsidiary were unable to remain viable as a
going concern, Ally’s right to participate in a distribution of assets would be subject to the prior claims of the subsidiary’s creditors (including,
in the case of Ally Bank, its depositors and the FDIC).

Ally Financial Inc. • Form 10-K

Legislative or regulatory initiatives on cybersecurity and data privacy could adversely impact our business and financial results.

Cybersecurity and data privacy risks have received heightened legislative and regulatory attention. For example, the U.S. banking
agencies have proposed enhanced cyber risk management standards that would apply to us and our service providers and that would address
cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience, and
situational awareness. Several states also have adopted or proposed cybersecurity laws targeting these issues.

Legislation and regulations on cybersecurity and data privacy may compel us to enhance or modify our systems, invest in new systems,
change our service providers, or alter our business practices or our policies on data governance and privacy. If any of these outcomes were to
occur, our operational costs could increase significantly. In addition, if government authorities were to conclude that we or our service
providers had not adequately implemented laws on cybersecurity and data privacy or had not otherwise met related supervisory expectations,
we could be subject to supervisory actions, related litigation by private plaintiffs, reputational damage, or a loss of investor confidence.

Risks Related to Our Business

Weak or deteriorating economic conditions, failures in underwriting, changes in underwriting standards, financial or systemic shocks, or

growth in our nonprime or used vehicle financing business could increase our credit risk, which could adversely affect our business and
financial results.

Our business is centered around lending and banking, and a significant percentage of our assets are composed of loans, leases, and

securities. As a result, credit risk is our most pronounced risk.

Our business and financial results depend significantly on household, business, economic, and market conditions. When those conditions

are weak or deteriorating, we could simultaneously experience reduced demand for credit and increased delinquencies or defaults, including
in the loans that we have securitized and in which we retain a residual interest. These kinds of conditions also could dampen the demand for
products and services in our insurance, banking, brokerage, and other businesses. Increased delinquencies or defaults could result as well
from us failing to appropriately underwrite loans that we originate or purchase or from us adopting—for strategic, competitive, or other
reasons—more liberal underwriting standards. If delinquencies or defaults on our loans increase, their value and the income derived from
them could be adversely affected, and we could incur increased administrative and other costs in seeking a recovery on claims and any
collateral. If unfavorable conditions are negatively affecting used vehicle or other collateral values at the same time, the amount and timing of
recoveries could suffer as well. Weak or deteriorating economic conditions also may negatively impact the market value and liquidity of our
investment securities, and we may be required to record additional impairment charges that adversely affect earnings if investment securities
suffer a decline in value that is considered other-than-temporary. There can be no assurance that our monitoring of our credit risk and our
efforts to mitigate credit risk through risk-based pricing, appropriate underwriting and investment policies, loss-mitigation strategies, and
diversification are, or will be, sufficient to prevent an adverse impact to our business and financial results. A financial or systemic shock and a
failure of a significant counterparty or a significant group of counterparties could negatively impact us as well, possibly to a severe degree,
due to our role as a financial intermediary and the interconnectedness of the financial system.

We continue to have exposure to nonprime consumer automotive financing and used vehicle financing. We define nonprime consumer
automotive loans primarily as those loans with a FICO® Score (or an equivalent score) at origination of less than 620. Customers that finance
used vehicles tend to have lower FICO® Scores as compared to new vehicle customers, and defaults resulting from vehicle breakdowns are
more likely to occur with used vehicles as compared to new vehicles that are financed. The carrying value of our nonprime consumer
automotive loans before allowance for loan losses was $8.8 billion, or approximately 12.9% of our total consumer automotive loans at
December 31, 2017, as compared to $9.1 billion, or approximately 13.8% of our total consumer automotive loans at December 31, 2016. At
December 31, 2017, and 2016, $204 million and $211 million, respectively, of nonprime consumer automotive loans were considered
nonperforming as they had been placed on nonaccrual status in accordance with our accounting policies. Refer to the Nonaccrual Loans
section of Note 1 to the Consolidated Financial Statements for additional information. Additionally, the carrying value of our consumer
automotive used vehicle loans before allowance for loan losses was $31.8 billion, or approximately 46.8% of our total consumer automotive
loans at December 31, 2017, as compared to $28.5 billion, or approximately 43.4% of our total consumer automotive loans at December 31,
2016. If our exposure to nonprime consumer automotive loans or used vehicle financing were to increase over time, our credit risk will
increase to a possibly significant degree.

As part of the underwriting process, we rely heavily upon information supplied by third parties. If any of this information is intentionally
or negligently misrepresented and the misrepresentation is not detected before completing the transaction, we may experience increased credit
risk from having engaged in the transaction.

Our allowance for loan losses may not be adequate to cover actual losses, and we may be required to significantly increase our

allowance, which may adversely affect our financial condition and results of operations.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expenses and
which represents management’s best estimate of probable credit losses that have been incurred within the existing portfolio of loans. Refer to
Note 1 to the Consolidated Financial Statements. The allowance is established to reserve for estimated loan losses and risks inherent in the
loan portfolio. Any increase in the allowance results in an associated decrease in net income and capital and, if significant, may adversely
affect our financial condition or results of operations.

Ally Financial Inc. • Form 10-K

The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires

us to make significant estimates of current credit risks using existing quantitative and qualitative information, all of which may change
substantially over time. Changes in economic conditions affecting borrowers, revisions to accounting rules and related guidance, new
qualitative or quantitative information about existing loans, identification of additional problem loans, changes in the size or composition of
our loan portfolio, and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. For
example, our shift to a full credit spectrum retail automotive finance portfolio mix has increased our allowance for loan losses and could
result in additional increases in our allowance for loan losses in the future.

The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update 2016-13, Financial Instruments — Credit
Losses (CECL), which introduces a new accounting model to measure credit losses for financial assets measured at amortized cost, such as
the vast majority of our finance receivables and loan portfolio. Under CECL, credit losses for financial assets measured at amortized cost
should be determined based on the total current expected credit losses over the life of the financial asset or group of financial assets. In effect,
this means that the financial asset or group of financial assets should be presented at the net amount expected to be collected. CECL will
become effective on January 1, 2020, and represents a significant departure from existing accounting principles generally accepted in the
United States of America (GAAP), which currently provide for credit losses on financial assets measured at amortized cost to be measured as
they are incurred. When effective, CECL is likely to materially increase our allowance for loan losses with a resulting negative adjustment to
equity. This increase to the allowance for loan losses could also adversely impact our regulatory capital position if the FRB and other U.S.
banking agencies do not amend existing regulatory capital rules to relieve us from the capital impact associated with the negative adjustment
to equity. Refer to the risk factor above, titled Requirements under the U.S. Basel III rules to increase the quality and quantity of regulatory
capital and future revisions to the Basel III framework may adversely affect our business and financial results, for more information about the
consequences of our failure to satisfy regulatory capital requirements.

Regulatory agencies periodically review our allowance for loan losses, as well as our methodology for calculating our allowance for loan
losses, and from time to time may insist on an increase in the allowance for loan losses or the recognition of additional loan charge-offs based
on judgments different than those of management. If these differences in judgment are considerable, our allowance could meaningfully
increase and result in a sizable decrease in our net income and capital.

We have dealer-centric automotive finance and insurance businesses, and a change in the key role of dealers within the automotive

industry or our ability to maintain or build relationships with them could have an adverse effect on our business, results of operations,
financial condition, or prospects.

Our Dealer Financial Services business, which includes our Automotive Finance and Insurance segments, depends on the continuation of

the key role of dealers within the automotive industry, the maintenance of our existing relationships with dealers, and our creation of new
relationships with dealers. Refer to the section titled Our Business in the MD&A that follows.

A number of trends are affecting the automotive industry and the role of dealers within it. These include challenges to the dealer’s role as

intermediary between manufacturers and purchasers, the rise of vehicle sharing and ride hailing, the development of autonomous and
alternative-energy vehicles, the impact of demographic shifts on attitudes and behaviors toward vehicle ownership and use, changing
expectations around the vehicle buying experience, adjustments in the geographic distribution of new and used vehicle sales, and
advancements in communications technology. Any one or more of these trends could adversely affect the key role of dealers and their
business models, profitability, and viability, and if this were to occur, our dealer-centric automotive finance and insurance businesses could
suffer as well.

While the number of dealers with whom we have retail relationships increased during 2017, the number of dealers with whom we have

wholesale relationships decreased approximately 5% as compared to December 31, 2016. Further, our share of commercial wholesale
financing remains at risk of decreasing in the future as a result of intense competition and other factors. If we are not able to maintain existing
relationships with significant automotive dealers or if we are not able to develop new relationships for any reason—including if we are not
able to provide services on a timely basis, offer products that meet the needs of the dealers, compete successfully with the products and
services of our competitors, or effectively counter the exclusivity privileges that some competitors have with automotive manufacturers—our
wholesale funding volumes, and the number of dealers with whom we have retail funding relationships, could decline in the future. If this
were to occur, our business, results of operations, financial condition, or prospects could be adversely affected.

General Motors Company (GM) and Fiat Chrysler Automobiles US LLC (Chrysler) dealers and their retail customers continue to

constitute a significant portion of our customer base, which creates concentration risk for us.

While we have diversified—and are continuing to diversify—our automotive finance and insurance businesses and to expand into other

financial services, GM and Chrysler dealers and their retail customers continue to constitute a significant portion of our customer base. In
2017, 56% of our new vehicle dealer inventory financing and 32% of our consumer automotive financing volume were transacted for GM-
franchised dealers and customers, and 28% of our new vehicle dealer inventory financing and 28% of our consumer automotive financing
volume were transacted for Chrysler dealers and customers. GM, Chrysler, and their captive automotive finance companies compete
forcefully with us and could take further actions that negatively impact the amount of business that we do with GM and Chrysler dealers and
their retail customers. Further, a significant adverse change in GM’s or Chrysler’s business—including, for example, in the production or sale
of GM or Chrysler vehicles, the quality or resale value of GM or Chrysler vehicles, GM’s or Chrysler’s relationships with its key suppliers, or

Ally Financial Inc. • Form 10-K

the rate or volume of recalls of GM or Chrysler vehicles—could negatively impact our GM and Chrysler dealer and retail customer bases.
Any future reductions in GM and Chrysler business that we are not able to offset could adversely affect our business and financial results.

Our business and financial results are dependent upon overall U.S. automotive industry sales volume.

Our automotive finance and insurance businesses can be impacted by the sales volume for new and used vehicles. Vehicle sales are

impacted, in turn, by several economic and market conditions, including employment levels, household income, interest rates, credit
availability, and fuel costs. For example, new vehicle sales decreased dramatically during the economic crisis that began in 2007–2008 and
did not rebound significantly until 2012 and 2013. Any future declines in new or used vehicle sales could have an adverse effect on our
business and financial results.

Vehicle loans and leases make up a significant part of our earning assets, and our business and financial results could suffer if used

vehicle prices are low or volatile or decrease in the future.

During the year ended December 31, 2017, more than 69% of our average earning assets were composed of vehicle loans or leases or
related residual securitization interests. If we experience higher losses on the sale of repossessed vehicles or lower or more volatile residual
values for off-lease vehicles, our business or financial results could be adversely affected.

General economic conditions, the supply of off-lease and other vehicles to be sold, relative market prices for new and used vehicles,

perceived vehicle quality, overall vehicle prices, the vehicle disposition channel, volatility in gasoline or diesel fuel prices, levels of
household income, interest rates, and other factors outside of our control heavily influence used vehicle prices. Consumer confidence levels
and the strength of automotive manufacturers and dealers can also influence the used vehicle market. For example, when the recent economic
crisis began in 2007–2008, sharp declines in used vehicle demand and sale prices adversely affected our remarketing proceeds and financial
results.

Our expectation of the residual value of a vehicle subject to an automotive lease contract is a critical element used to determine the
amount of the lease payments under the contract at the time the customer enters into it. As a result, to the extent that the actual residual value
of the vehicle—as reflected in the sale proceeds received upon remarketing at lease termination—is less than the expected residual value for
the vehicle at lease inception, we will incur additional depreciation expense and lower profit on the lease transaction than our priced
expectation. Our expectation of used vehicle values is also a factor in determining our pricing of new loan and lease originations. To the
extent that used vehicle prices are significantly lower than our expectations, our profit on vehicle loans and leases could be substantially less
than our expectations, even more so if our estimate of loss frequency is underestimated as well. In addition, we could be adversely affected if
we fail to efficiently process and effectively market off-lease vehicles and repossessed vehicles and, as a consequence, incur higher-than-
expected disposal costs or lower-than-expected proceeds from the vehicle sales.

The levels of or changes in interest rates could affect our results of operations and financial condition.

We are highly dependent on net interest income, which is the difference between interest income on earning assets (such as loans and
investments) and interest expense on deposits and borrowings. Net interest income is significantly affected by market rates of interest, which
in turn are influenced by monetary and fiscal policies, general economic and market conditions, the political and regulatory environments,
business and consumer sentiment, competitive pressures, and expectations about the future (including future changes in interest rates). We
may be adversely affected by policies, laws, or events that have the effect of flattening or inverting the yield curve (that is, the difference
between long-term and short-term interest rates), depressing the interest rates associated with our earning assets to levels near the rates
associated with our interest expense, or changing the spreads among different interest rate indices.

The levels of or changes in interest rates could adversely affect us beyond our net interest income, including the following:

•

increase the cost or decrease the availability of deposits or other variable-rate funding instruments;

reduce the return on or demand for loans or increase the prepayment speed of loans;

increase customer or counterparty delinquencies or defaults;

negatively impact our ability to remarket off-lease and repossessed vehicles; and

reduce the value of our loans, retained interests in securitizations, and fixed-income securities in our investment portfolio and the
efficacy of our hedging strategies.

The level of and changes in market rates of interest—and, as a result, these risks and uncertainties—are beyond our control. The
dynamics among these risks and uncertainties are also challenging to assess and manage. For example, while an accommodative monetary
policy may benefit us to some degree by spurring economic activity among our customers, such a policy may ultimately cause us more harm
by inhibiting our ability to grow or sustain net interest income. A rising interest rate environment can pose different challenges, such as
potentially slowing the demand for credit, increasing delinquencies and defaults, and reducing the values of our loans and fixed-income
securities. Following a prolonged period in which the federal funds rate was stable or decreasing, the FRB has begun to increase this
benchmark rate. In addition, the FRB has begun to end its quantitative-easing program and reduce the size of its balance sheet, which is also

Ally Financial Inc. • Form 10-K

expected to exert upward pressure on interest rates. Refer to the section titled Market Risk in the MD&A that follows and Note 22 to the
Consolidated Financial Statements.

Uncertainty about the future of the London Interbank Offer Rate (LIBOR) may adversely affect our business and financial results.

LIBOR meaningfully influences market interest rates around the globe. In July 2017, the Chief Executive of the United Kingdom
Financial Conduct Authority, which regulates LIBOR, announced its intent to stop persuading or compelling banks to submit rates for the
calculation of LIBOR to the administrator of LIBOR after 2021. This announcement indicates that the continuation of LIBOR as currently
constructed is not guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR
submissions to the administrator of LIBOR, whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere,
and whether other rate or rates may become accepted alternatives to LIBOR. No assurance can be provided that these uncertainties or their
resolution will not adversely affect the use, level, and volatility of LIBOR or other interest rates or the value of LIBOR-based securities—
including Ally’s 8.125% Fixed Rate/Floating Rate Trust Preferred Securities, Series 2—or other securities or financial arrangements. These
uncertainties or their resolution also could negatively impact our funding costs, loan and other asset values, asset-liability management
strategies, and other aspects of our business and financial results.

We rely extensively on third-party service providers in delivering products and services to our customers and otherwise conducting our

business and operations, and their failure to perform to our standards or other issues of concern with them could adversely affect our
reputation, business, and financial results.

Third-party service providers are key to much of our business and operations, including online and mobile banking, mortgage finance,

brokerage, customer service, and operating systems and infrastructure. While we have implemented a supplier-risk-management program and
can exert varying degrees of influence over our service providers, we do not control them, their actions, or their businesses. No assurance can
be provided, therefore, that service providers will perform to our standards, adequately represent our brand, comply with applicable law,
appropriately manage their own risks, remain financially or operationally viable, or continue to provide us with the services that we require.
In such a circumstance, our ability to deliver products and services to customers, to satisfy customer expectations, and to otherwise
successfully conduct our business and operations could be adversely affected. In addition, we may need to incur substantial expenses to
address issues of concern with a service provider, and even if the issues cannot be acceptably resolved, we may not be able to timely or
effectively replace the service provider due to contractual restrictions, the unavailability of acceptable alternative providers, or other reasons.
Further, regardless of how much we can influence our service providers, issues of concern with them could result in supervisory actions
against us and could harm our reputation, business, and financial results.

Our operating systems or infrastructure, as well as those of our service providers or others on whom we rely, could fail or be

interrupted, which could disrupt our business and adversely affect our results of operations, financial condition, and prospects.

We rely heavily upon communications, data management, and other operating systems and infrastructure to conduct our business and
operations, which creates meaningful operational risk for us. Any failure of or interruption in these systems or infrastructure or those of our
service providers or others on whom we rely—including as a result of inadequate or failed technology or processes, unplanned or
unsuccessful updates to technology, sudden increases in transaction volume, human errors, fraud or other misconduct, deficiencies in the
integration of acquisitions or the commencement of new businesses, energy or similar infrastructure outages, disruptions in communications
networks or systems, natural disasters, catastrophic events, pandemics, acts of terrorism, political or social unrest, external or internal security
breaches, acts of vandalism, cyberattacks such as computer viruses and malware, misplaced or lost data, or breakdowns in business continuity
plans—could cause failures or delays in receiving applications for loans, underwriting or processing loans, servicing loans, accessing online
accounts, processing transactions, executing brokerage orders, communicating with our customers, managing our investment portfolio, or
otherwise conducting our business and operations. These adverse effects could be exacerbated if systems or infrastructure need to be taken
offline or meaningfully repaired, if backup systems or infrastructure are not adequately redundant and effective for the conduct of our
business and operations, or if technological or other solutions do not exist or are slow to be developed. Further, to the extent that the systems
or infrastructure of service providers or others are involved, we may have little or no control or influence over how and when failures or
delays are addressed. As a digital financial services company, we are susceptible to business, reputational, financial, regulatory, and other
harm as a result of these risks.

In the ordinary course of our business, we collect, store, process, and transmit sensitive, confidential, or proprietary data and other
information, including business information, intellectual property, and the personally identifiable information of customers and employees.
The secure collection, storage, processing, and transmission of this information are critical to our business and reputation, and if any of this
information were mishandled, misused, improperly accessed, lost, or stolen or if related operations were disabled or otherwise disrupted, we
could suffer significant business, reputational, financial, regulatory, and other damage.

Even when a failure of or interruption in operating systems or infrastructure is timely resolved, we may need to expend substantial
resources in doing so, may be required to take actions that could adversely affect customer satisfaction or behavior, and may be exposed to
reputational damage. We also could be exposed to contractual claims, supervisory actions, or litigation by private plaintiffs.

We face a wide array of security risks that could result in business, reputational, financial, regulatory, and other harm to us.

Our operating systems and infrastructure, as well as those of our service providers or others on whom we rely, are subject to security
risks that are rapidly evolving and increasing in scope and complexity, in part, because of the introduction of new technologies, the expanded

Ally Financial Inc. • Form 10-K

use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions, and
the increased sophistication and activities of hostile state-sponsored actors, organized crime, perpetrators of fraud, hackers, terrorists, and
others. We along with other financial institutions, our service providers, and others on whom we rely are especially likely to be the target of
cyberattacks, including computer viruses, malware, malicious or destructive code, phishing or spearphishing attacks, denial-of-service or
denial-of-information attacks, ransomware, identity theft, access violations by employees or vendors, attacks on the personal email of
employees, and ransom demands accompanied by threats to expose security vulnerabilities. We, our service providers, and others on whom
we rely are also exposed to more traditional security threats to physical facilities and personnel.

These security risks could result in business, reputational, financial, regulatory, and other harm to us. For example, if sensitive,

confidential, or proprietary data or other information about us or our customers or employees were improperly accessed or destroyed because
of a security breach, we could experience business or operational disruptions, reputational damage, contractual claims, supervisory actions, or
litigation by private plaintiffs. As security threats evolve, moreover, we expect to continue expending significant resources to enhance our
defenses, to educate our employees, to monitor and support the defenses established by our service providers and others on whom we rely,
and to investigate and remediate incidents and vulnerabilities as they arise or are identified. Even so, we may not be able to anticipate or
implement effective preventive measures against all security breaches, especially because techniques change frequently and attacks can
originate with no warning from a wide variety of sources around the globe. A sophisticated breach, moreover, may not be identified until well
after the attack has occurred and the damage has been caused.

We also could be adversely affected by security risks faced by others. For example, a cyberattack or other security breach affecting a
service provider or another entity on whom we rely could negatively impact us and our ability to conduct business and operations just as
much as a breach affecting us directly. Even worse, in such a circumstance, we may not receive timely notice of or information about the
breach or be able to exert any meaningful control or influence over how and when the breach is addressed. In addition, a security threat
affecting the business community, the markets, or parts of them may cycle or cascade through the financial system and harm us. The mere
perception of a security breach involving any part of the financial services industry, whether or not true, also could damage our business and
operations.

Many if not all of these risks and uncertainties are beyond our control. Refer to section titled Risk Management in the MD&A that

follows.

We are heavily reliant on technology, and a failure in effectively implementing technology initiatives or anticipating future technology

needs or demands could adversely affect our business or financial results.

We significantly depend on technology to deliver our products and services and to otherwise conduct our business and operations. To
remain technologically competitive and operationally efficient, we invest in system upgrades, new solutions, and other technology initiatives.
Many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial
financial, human, and other resources. Although we take steps to mitigate the risks and uncertainties associated with these initiatives, no
assurance can be provided that they will be implemented on time, within budget, or without negative operational or customer impact or that,
once implemented, they will perform as we or our customers expect. We also may not succeed in anticipating or keeping pace with future
technology needs, the technology demands of customers, or the competitive landscape for technology. If we were to misstep in any of these
areas, our business or financial results could be negatively impacted.

Our enterprise, compliance, and other risk management programs or functions may not be effective in mitigating risk and loss.

We maintain an independent enterprise risk management program that is designed to identify, measure, assess, monitor, report, and
mitigate the risks that we face. These include credit, insurance/underwriting, vehicle-residual, market, liquidity, business/strategic, reputation,
and operational risks. We also maintain a compliance risk management program to identify, measure, assess, monitor, and report on our
adherence to applicable law, policies, and procedures. There can be no assurance that our frameworks or models for enterprise, compliance,
and other risk management and related controls—including the scope and amount of our insurance and reinsurance coverage—will effectively
mitigate risk and limit losses in our business and operations. If conditions or circumstances arise that expose flaws or gaps in our enterprise,
compliance, or other risk management programs or if our controls break down, the performance and value of our business and operations
could be adversely affected. We could be negatively impacted as well if, despite adequate programs being in place, our risk management or
compliance personnel are ineffective in executing them and mitigating risk and loss. Refer to the section titled Risk Management in the
MD&A that follows.

We are or may be subject to potential liability in connection with pending or threatened legal proceedings and other matters, which

could adversely affect our business or financial results.

We are involved from time to time in a variety of judicial, alternative-dispute, and other proceedings arising out of our business and

operations. These legal matters may be formal or informal and include litigation and arbitration with one or more identified claimants,
certified or purported class actions with yet-to-be-identified claimants, and regulatory or other governmental information-gathering requests,
examinations, investigations, and enforcement proceedings. Our legal matters exist in varying stages of adjudication, arbitration, negotiation,
or investigation and span our lines of business and operations. Claims may be based in law or equity—such as those arising under contracts or
in tort and those involving banking, consumer protection, securities, tax, employment, and other laws—and some can present novel legal
theories and allege substantial or indeterminate damages.

Ally Financial Inc. • Form 10-K

The course and outcome of legal matters are inherently unpredictable. This is especially so when a matter is still in its early stages, the
damages sought are indeterminate or unsupported, significant facts are unclear or disputed, novel questions of law or other meaningful legal
uncertainties exist, a request to certify a proceeding as a class action is outstanding or granted, multiple parties are named, or regulatory or
other governmental entities are involved. As a result, we often are unable to determine how or when threatened or pending legal matters will
be resolved and what losses may be incurred. Actual losses may be higher or lower than any amounts accrued or estimated for those matters,
possibly to a significant degree. Refer to Note 30 to the Consolidated Financial Statements. In addition, while we maintain insurance policies
to mitigate the cost of litigation and other proceedings, these policies have deductibles, limits, and exclusions that may diminish their value or
efficacy. Substantial legal claims, even if not meritorious, could have a detrimental impact on our business, results of operations, and financial
condition and could cause us reputational harm.

Our inability to attract, retain, or motivate qualified employees could adversely affect our business or financial results.

Skilled employees are our most important resource, and competition for talented people is intense. Even though compensation and

benefits expense is among our highest expenses, we may not be able to locate and hire the best people, keep them with us, or properly
motivate them to perform at a high level. Recent scrutiny of compensation practices, especially in the financial services industry, has made
this only more difficult. In addition, many parts of our business are particularly dependent on key personnel. If we were to lose and find
ourselves unable to replace these personnel or other skilled employees or if the competition for talent were to drive our compensation costs to
unsustainable levels, our business and financial results could be negatively impacted.

Our ability to successfully make opportunistic acquisitions is subject to significant risks, including the risk that government authorities
will not provide the requisite approvals, the risk that integrating acquisitions may be more difficult, costly, or time consuming than expected,
and the risk that the value of acquisitions may be less than anticipated.

We may from time to time seek to make opportunistic acquisitions of other financial services companies or businesses. These

acquisitions may be subject to regulatory approval, and no assurance can be provided that we will be able to obtain that approval in a timely
manner or at all. Even when we are able to obtain regulatory approval, the failure of other closing conditions to be satisfied or waived could
delay the completion of an acquisition for a significant period of time or prevent it from occurring altogether. Any failure or delay in closing
an acquisition could adversely affect our reputation, business, and performance.

Acquisitions involve numerous risks and uncertainties, including lower-than-expected performance or higher-than-expected costs,
difficulties related to integration, diversion of management’s attention from other business activities, changes in relationships with customers
or counterparties, and the potential loss of key employees. An acquisition also could be dilutive to our existing stockholders if we were to
issue common stock to fully or partially pay or fund the purchase price. We, moreover, may not be successful in identifying appropriate
acquisition candidates, integrating acquired companies or businesses, or realizing expected value from acquisitions. There is significant
competition for valuable acquisition targets, and we may not be able to acquire other companies or businesses on attractive terms. No
assurance can be given that we will pursue future acquisitions, and our ability to grow and successfully compete may be impaired if we
choose not to pursue or are unable to successfully make acquisitions.

Our business requires substantial capital and liquidity, and a disruption in our funding sources or access to the capital markets may

have an adverse effect on our liquidity, capital positions, and financial condition.

Liquidity is the ability to fund increases in assets and meet obligations as they come due, all without incurring unacceptable losses.

Banks are especially vulnerable to liquidity risk because of their role in the maturity transformation of demand or short-term deposits into
longer-term loans or other extensions of credit. We, like other financial services companies, rely to a significant extent on external sources of
funding (such as deposits and borrowings) for the liquidity needed to conduct our business and operations. A number of factors beyond our
control, however, could have a detrimental impact on the availability or cost of that funding and thus on our liquidity. These include market
disruptions, changes in our credit ratings or the sentiment of our investors, the state of the regulatory environment and monetary and fiscal
policies, reputational damage, financial or systemic shocks, and significant counterparty failures. Unexpected declines or limits on dividends
or other distributions from our subsidiaries also could adversely affect Ally’s liquidity position.

We have significant maturities of unsecured debt each year. While we have reduced our reliance on unsecured funding in recent years, it
remains an important component of our capital structure and financing plans. At December 31, 2017, approximately $3.6 billion in principal
amount of total outstanding consolidated unsecured debt is scheduled to mature in 2018, and approximately $1.7 billion and $2.3 billion is
scheduled to mature in 2019 and 2020, respectively. We also obtain short-term funding from the sale of floating-rate demand notes, all of
which the holders may elect to have redeemed at any time without restriction. At December 31, 2017, approximately $3.2 billion in principal
amount of demand notes were outstanding, which is not included in the amount of unsecured debt described above. We also rely substantially
on secured funding. At December 31, 2017, approximately $7.5 billion in principal amount of total outstanding consolidated secured long-
term debt is scheduled to mature in 2018, approximately $8.4 billion is scheduled to mature in 2019, and approximately $6.9 billion is
scheduled to mature in 2020. Furthermore, at December 31, 2017, approximately $28.8 billion in certificates of deposit at Ally Bank are
scheduled to mature in 2018, which is not included in the amounts provided above. Additional funding, whether through deposits or
borrowings, will be required to fund a substantial portion of the debt maturities over these periods.

We continue to rely as well on our ability to borrow from other financial institutions, and many of our primary bank facilities are up for
renewal on a yearly basis. Any weakness in market conditions, tightening of credit availability, or other events referenced earlier in this risk
factor could have a negative effect on our ability to refinance these facilities and could increase the costs of bank funding. Ally and Ally Bank

Ally Financial Inc. • Form 10-K

also continue to access the securitization markets. While those markets have continued to stabilize following the liquidity crisis that
commenced in 2007–2008, there can be no assurances that these sources of liquidity will remain available to us.

Our policies and controls are designed to ensure that we maintain adequate liquidity to conduct our business in the ordinary course even
in a stressed environment. There is no guarantee, however, that our liquidity position will never become compromised. In such an event, we
may be required to sell assets at a loss or reduce loan and lease originations in order to continue operations. This could damage the
performance and value of our business, prompt regulatory intervention, and harm our reputation, and if the condition were to persist for any
appreciable period of time, our viability as a going concern could be threatened. Refer to section titled Liquidity Management, Funding, and
Regulatory Capital in the MD&A that follows and Note 21 to the Consolidated Financial Statements.

Our indebtedness and other obligations are significant and could adversely affect our business and financial results.

We have a significant amount of indebtedness apart from deposit liabilities. At December 31, 2017, we had approximately $56.8 billion

in principal amount of indebtedness outstanding (including $36.9 billion in secured indebtedness). Interest expense on our indebtedness
constituted approximately 21% of our total financing revenue and other interest income for the year ended December 31, 2017. We also have
the ability to create additional indebtedness.

If our debt service obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional
indebtedness, we may be required to dedicate a significant portion of our cash flow from operations to the payment of principal of, and
interest on, our indebtedness, which would reduce the funds available for other purposes. Our indebtedness also could limit our ability to
withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions. In addition, if we are
unable to satisfy our indebtedness and other obligations in full and on time, our business, reputation, and value as a going concern could be
profoundly and perhaps inexorably damaged.

The markets for automotive financing, insurance, banking (including corporate finance and mortgage finance), and brokerage are

extremely competitive, and competitive pressures could adversely affect our business and financial results.

The markets for automotive financing, insurance, banking (including corporate finance and mortgage finance), and brokerage are highly

competitive, and we expect competitive pressures only to intensify in the future, especially in light of the regulatory and supervisory
environments in which we operate, technological innovations that alter the barriers to entry, current and evolving economic and market
conditions, changing customer preferences and consumer and business sentiment, and government monetary and fiscal policies. Refer to the
section above titled Industry and Competition in Part I, Item 1 of this report. Competitive pressures may drive us to take actions that we might
otherwise eschew, such as lowering the interest rates or fees on loans, raising the interest rates on deposits, or adopting more liberal
underwriting standards. These pressures also may accelerate actions that we might otherwise elect to defer, such as substantial investments in
systems or infrastructure. Whatever the reason, actions that we take in response to competition may adversely affect our results of operations
and financial condition. These consequences could be exacerbated if we are not successful in introducing new products and services,
achieving market acceptance of our products and services, developing and maintaining a strong customer base, or prudently managing
expenses.

Our borrowing costs and access to the banking and capital markets could be negatively impacted if our credit ratings are downgraded

or otherwise fail to meet investor expectations or demands.

The cost and availability of our funding are meaningfully affected by our short- and long-term credit ratings. Each of Standard & Poor’s

Rating Services, Moody’s Investors Service, Inc., Fitch, Inc., and Dominion Bond Rating Service rates some or all of our debt, and these
ratings reflect the rating agency’s opinion of our financial strength, operating performance, strategic position, and ability to meet our
obligations. Agency ratings are not a recommendation to buy, sell, or hold any security and may be revised or withdrawn at any time. Each
agency’s rating should be evaluated independently of any other agency’s rating.

Some of our current credit ratings are below investment grade, which negatively impacts our access to liquidity and increases our

borrowing costs in the banking and capital markets. If our credit ratings were to be downgraded further or were to otherwise fail to meet
investor expectations or demands, our borrowing costs and access to the banking and capital markets could become even more challenging
and, as a result, negatively affect our business and financial results. In addition, downgrades of our credit ratings or their failure to meet
investor expectations or demands could result in more restrictive terms and conditions being added to any new or replacement financing
arrangements as well as trigger disadvantageous provisions of existing borrowing arrangements.

Challenging business, economic, or market conditions may adversely affect our business, results of operations, and financial condition.

Our businesses are driven by wealth creation in the economy, robust market activity, monetary and fiscal stability, and positive investor,

business, and consumer sentiment. A downturn in economic conditions, disruptions in the equity or debt markets, high unemployment or
underemployment, depressed vehicle or housing prices, unsustainable debt levels, unfavorable changes in interest rates, declines in household
incomes, deteriorating consumer or business sentiment, consumer or commercial bankruptcy filings, or declines in the strength of national or
local economies could decrease demand for our products and services, increase the amount and rate of delinquencies and losses, raise our
operating and other expenses, and negatively impact the returns on and the value of our loans, investment portfolio, and other assets. Further,
if a significant and sustained increase in fuel prices or other adverse conditions were to lead to diminished new and used vehicle purchases or
prices, our automotive finance and insurance businesses could suffer considerably. In addition, concerns about the pace of economic growth

Ally Financial Inc. • Form 10-K

and uncertainty about fiscal and monetary policies can result in significant volatility in the financial markets and could impact our ability to
obtain cost-effective funding. If any of these events were to occur or worsen, our business, results of operation, and financial condition could
be adversely affected.

Acts or threats of terrorism, natural disasters, and other conditions or events beyond our control could adversely affect us.

Geopolitical conditions, natural disasters, and other conditions or events beyond our control may adversely affect our business, results of

operations, financial condition, or prospects. For example, acts or threats of terrorism and political or military actions taken in response to
terrorism could adversely affect general economic, business, or market conditions and, in turn, us. We also could be negatively impacted if
our key personnel, a significant number of our employees, or our systems or infrastructure were to become unavailable or damaged due to a
pandemic, natural disaster, war, act of terrorism, accident, or similar cause. These same risks and uncertainties arise too for the service
providers and counterparties on whom we depend as well as their own third-party service providers and counterparties.

Significant repurchases or indemnification payments in our securitizations or whole-loan sales could harm our profitability and financial

condition.

We have repurchase and indemnification obligations in our securitizations and whole-loan sales. If we were to breach a representation,

warranty, or covenant in connection with a securitization or whole-loan sale, we may be required to repurchase the affected loans or leases or
otherwise compensate investors or purchasers for losses caused by the breach. If the scale or frequency of repurchases or indemnification
payments were to increase substantially from its present levels, our results of operations and financial condition could be adversely affected.
In such a circumstance, we also could suffer reputational damage, become subject to stricter supervisory scrutiny, and find our access to
capital and banking markets more limited or more costly.

Our business and operations make extensive use of models, and we could be adversely affected if our design, implementation, or use of

models is flawed.

We use quantitative models to price products and services, measure risk, estimate asset and liability values, assess capital and liquidity,

manage our balance sheet, create financial forecasts, and otherwise conduct our business and operations. If the design, implementation, or use
of any of these models is flawed, we could make strategic or tactical decisions based on incorrect, misleading, or incomplete information. In
addition, to the extent that any inaccurate model outputs are used in reports to banking agencies or the public, we could be subjected to
supervisory actions, litigation, and other proceedings that may adversely affect our business and financial results. Refer to section titled Risk
Management in the MD&A that follows.

Our hedging strategies may not be successful in mitigating our interest rate, foreign exchange, and market risks, which could adversely

affect our financial results.

We employ various hedging strategies to mitigate the interest rate, foreign exchange, and market risks inherent in many of our assets and

liabilities. Our hedging strategies rely considerably on assumptions and projections regarding our assets and liabilities as well as general
market factors. If any of these assumptions or projections prove to be incorrect or our hedges do not adequately mitigate the impact of
changes in interest rates, foreign exchange rates, and other market factors, we may experience volatility in our earnings that could adversely
affect our profitability and financial condition. In addition, we may not be able to find market participants that are willing to act as our
hedging counterparties on acceptable terms or at all, which could have an adverse effect on the success of our hedging strategies.

We use estimates and assumptions in determining the value or amount of many of our assets and liabilities. If our estimates or
assumptions prove to be incorrect, our cash flow, profitability, financial condition, and business prospects could be adversely affected.

We use estimates and various assumptions in determining the fair value of many of our assets, including retained interests from

securitizations, loans held-for-sale, and other investments that do not have an established market value or are not publicly traded. We also use
estimates and assumptions in determining the residual values of leased vehicles. In addition, we use estimates and assumptions in determining
our reserves for legal matters, insurance losses, and loss adjustment expenses (which represent the accumulation of estimates for both
reported losses and those incurred, but not reported, including claims adjustment expenses relating to direct insurance and assumed
reinsurance agreements). Refer to section titled Critical Accounting Estimates in the MD&A that follows. Our assumptions and estimates may
be inaccurate for many reasons. For example, they often involve matters that are inherently difficult to predict and that are beyond our control
(such as macroeconomic conditions and their impact on our dealers) and often involve complex interactions between a number of dependent
and independent variables, factors, and other assumptions. Assumptions and estimates are also far more difficult during periods of market
dislocation or illiquidity. As a result, our actual experience may differ substantially from these estimates and assumptions. A meaningful
difference between our estimates and assumptions and our actual experience may adversely affect our cash flow, profitability, financial
condition, and business prospects and may increase the volatility of our financial results. In addition, several different judgments associated
with assumptions or estimates could be reasonable under the circumstances and yet result in significantly different results being reported.

Significant fluctuations in the valuation of investment securities or market prices could negatively affect our financial results.

Market prices for securities and other financial assets are subject to considerable fluctuation. Fluctuations may result, for example, from

perceived changes in the value of the asset, the relative price of alternative investments, shifts in investor sentiment, geopolitical events,
actual or expected changes in monetary or fiscal policies, and general market conditions. Due to these kinds of fluctuations, the amount that

Ally Financial Inc. • Form 10-K

we realize in the subsequent sale of an investment may significantly differ from the last reported value and could negatively affect our
financial results. Additionally, negative fluctuations in the value of available-for-sale investment securities could result in unrealized losses
recorded in equity.

Changes in accounting standards could adversely affect our reported revenues, expenses, profitability, and financial condition.

Our financial statements are subject to the application of GAAP, which are periodically revised or expanded. The application of GAAP is

also subject to varying interpretations over time. Accordingly, we are required to adopt new or revised accounting standards or comply with
revised interpretations that are issued from time to time by various parties, including accounting standard setters and those who interpret the
standards, such as the FASB, the SEC, banking agencies, and our independent registered public accounting firm. Those changes are beyond
our control but could adversely affect our revenues, expenses, profitability, or financial condition. Refer to Note 1 to the Consolidated
Financial Statements for several financial accounting standards recently issued by the FASB with effective dates between January 1, 2018,
and January 1, 2020.

The financial system is highly interrelated, and the failure of even a single financial institution could adversely affect us.

The financial system is highly interrelated, including as a result of lending, trading, clearing, counterparty, and other relationships. We

have exposure to and routinely execute transactions with a wide variety of financial institutions, including brokers, dealers, commercial
banks, and investment banks. If any of these institutions were to become unstable, were to fail in meeting its obligations in full and on time,
or were to enter bankruptcy, conservatorship, or receivership, the consequences could ripple throughout the financial system and may
adversely affect our business, results of operations, financial condition, or prospects. Because of interrelationships within the financial system,
this could occur even if the institution itself were not systemically important or perceived to play a meaningful role in the stable functioning
of the financial markets.

Adverse economic conditions or changes in laws in the states where we have loan or lease concentrations may negatively affect our

business and financial results.

We are exposed to portfolio concentrations in some states, including California, Texas, and Florida. Factors adversely affecting the
economies and applicable laws in these states could have an adverse effect on our business, results of operations, and financial condition.

Negative publicity outside of our control, or our failure to successfully manage issues arising from our conduct or in connection with the

financial services industry generally, could damage our reputation and adversely affect our business or financial results.

The performance and value of our business could be negatively impacted by any reputational harm that we may suffer. This harm could
arise from negative publicity outside of our control or our failure to adequately address issues arising from our conduct or in connection with
the financial services industry generally. Risks to our reputation could arise in any number of contexts—for example, stricter regulatory or
supervisory environments, cyber incidents and other security breaches, inabilities to meet customer expectations, mergers and acquisitions,
lending or banking practices, actual or perceived conflicts of interest, failures to prevent money laundering, inappropriate conduct by
employees, and inadequate corporate governance.

Risks Related to Ownership of Our Common Stock

Our ability to pay dividends on our common stock or repurchase shares in the future may be limited.

Any future dividends on our common stock or share repurchases will be determined by our Board of Directors in its sole discretion and

will depend on our business, financial condition, earnings, capital, liquidity, and other factors at the time. In addition, any plans to continue
dividends or share repurchases in the future will be subject to the FRB’s review of and non-objection to our capital plan, which is
unpredictable. Refer to the section above titled Regulation and Supervision in Part I, Item 1 of this report. There is no assurance that our
Board of Directors will approve, or the FRB will permit, future dividends or share repurchases.

It is possible that any indentures or other financing arrangements that we execute in the future could limit our ability to pay dividends on

our capital stock, including our common stock. In the event that any of our indentures or other financing arrangements in the future restrict
that ability, we may be unable to pay dividends unless and until we can refinance the amounts outstanding under those arrangements. In
addition, under Delaware law, our Board of Directors may declare dividends on our capital stock only to the extent of our statutory surplus
(which is defined as the amount equal to total assets minus total liabilities, in each case at fair market value, minus statutory capital) or, if no
surplus exists, out of our net profits for the then-current or immediately preceding fiscal year. Further, even if we are permitted under our
contractual obligations and Delaware law to pay dividends on our common stock, we may not have sufficient cash or regulatory approvals to
do so.

Ally Financial Inc. • Form 10-K

The market price of our common stock could be adversely impacted by anti-takeover provisions in our organizational documents and
Delaware law that could delay or prevent a takeover attempt or change in control of Ally or by other banking, antitrust, or corporate laws
that have or are perceived as having an anti-takeover effect.

Our certificate of incorporation, our bylaws, and Delaware law contain provisions that could have the effect of discouraging, hindering,
or preventing an acquisition that our Board of Directors does not find to be in the best interests of us and our stockholders. For example, our
organizational documents include provisions:

•

limiting the liability of our directors and providing indemnification to our directors and officers; and

limiting the ability of our stockholders to call and bring business before special meetings of stockholders by requiring any
requesting stockholders to hold at least 25% of our common stock in the aggregate.

These provisions, alone or together, could delay hostile takeovers and changes in control of Ally or changes in management.

In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, which generally prohibits a
corporation from engaging in various business combination transactions with any interested stockholder (generally defined as a stockholder
who owns 15% or more of a corporation’s voting stock) for a period of three years following the time that the stockholder became an
interested stockholder, except under specified circumstances such as the receipt of prior board approval.

Banking and antitrust laws, including associated regulatory-approval requirements, also impose significant restrictions on the acquisition

of direct or indirect control over any BHC like Ally or any insured depository institution like Ally Bank.

Any provision of our organizational documents or applicable law that deters, hinders, or prevents a non-negotiated takeover or change in

control of Ally could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also
affect the price that some investors are willing to pay for our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal corporate offices are located in Detroit, Michigan, and Charlotte, North Carolina. In Detroit, we lease approximately
317,000 square feet of office space under a lease that expires in December 2028. In Charlotte, we lease approximately 233,000 square feet of
office space under a variety of leases expiring between November 2019 and May 2024. In September 2017, we entered into a new agreement,
scheduled to commence in April 2021, to lease approximately 543,000 square feet of office space in Charlotte under a lease that is expected to
expire in March 2036. Under the new lease we plan to consolidate our three current Charlotte, North Carolina locations, through a series of
phases, as the existing leases expire.

The primary offices for both our Automotive Finance and Insurance operations are located in Detroit, and are included in the totals
referenced above. The primary office for our Mortgage Finance operations is located in Charlotte, where, in addition to the totals referenced
above, we lease approximately 84,000 square feet of office space under a lease that expires in December 2022. Upon expiration, our
Mortgage Finance operations will relocate to the consolidated office space in Charlotte, North Carolina, referenced above. The primary office
for our Corporate Finance operations is located in New York, New York, where we lease approximately 55,000 square feet of office space
under a lease that expires in June 2023.

In addition to the properties described above, we lease additional space to conduct our operations. We believe our facilities are adequate

for us to conduct our present business activities.

Item 3. Legal Proceedings

Refer to Note 30 to the Consolidated Financial Statements for a discussion related to our legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

Part II

Ally Financial Inc. • Form 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Market Information

Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “ALLY.” At December 31, 2017, we had
437,053,936 shares of common stock outstanding, compared to 467,000,306 shares at December 31, 2016. The following table sets forth, for
the periods indicated, the reported high and low sale prices for our common stock on the NYSE, and the cash dividends declared on our
common stock.

($ per share)

Year ended December 31, 2017

First quarter

Second quarter

Third quarter

Fourth quarter

Year ended December 31, 2016

First quarter

Second quarter

Third quarter

Fourth quarter

Holders

High

Low

Cash dividends
declared

23.62

19.05

21.75

24.32

29.50

18.11

20.65

23.90

18.99

14.55

18.76

20.14

20.60

14.84

15.37

16.68

0.08

0.12

—

0.08

As of February 16, 2018, we had approximately 35 holders of record of our common stock.

Dividends

Our payment of any dividends on our common stock in the future will be determined by our Board of Directors in its sole discretion and

will depend on business conditions, our financial condition, earnings and liquidity, and other factors. Any plans to continue payment of
dividends on our common stock in the future would be subject to the FRB’s review and absence of objection. Refer to the section above titled
Regulation and Supervision — Bank Holding Company and Financial Holding Company Status in Item 1 for additional information.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information about the securities authorized for issuance under our equity compensation plans as of

December 31, 2017.

(1)
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights (a)
(in thousands)

(2)
Weighted-average exercise
price of outstanding options,
warrants and rights

(3)
Number of securities remaining
available for further issuance
under equity compensation
plans (excluding securities
reflected in column (1)) (b)
(in thousands)

7,644

—

30,134

Plan Category

Equity compensation plans

approved by security holders

Total

(a)

(b)

Includes restricted stock units outstanding under the Incentive Compensation Plan and deferred stock units outstanding under the Non-Employee
Directors Equity Compensation Plan.
Includes 27,178,115 securities available for issuance under the plans identified in (a) above and 2,955,655 securities available for issuance under Ally’s
Employee Stock Purchase Plan.

Ally Financial Inc. • Form 10-K

Stock Performance Graph

The following graph compares the cumulative total return to stockholders on our common stock relative to the cumulative total returns of

the S&P 500 index and the S&P Financials index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made
in our common stock and in each index on April 10, 2014 (the date our common stock first commenced trading on the NYSE), and its relative
performance is tracked through December 31, 2017. The returns shown are based on historical results and are not intended to suggest future
performance.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or incorporated by reference into any filing of Ally under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.

Recent Sales of Unregistered Securities

Ally did not have any sales of unregistered securities in the last three fiscal years.

Purchases of Equity Securities by the Issuer

The following table presents repurchases of our common stock, by month, for the three months ended December 31, 2017.

Three months ended December 31, 2017

October 2017

November 2017

December 2017

Total

Total number
of shares
repurchased (a)
(in thousands)

Weighted-average
price paid per
share (a) (b)
(in dollars)

Total number of
shares
repurchased as
part of publicly
announced
program (a) (c)
(in thousands)

Maximum
approximate dollar
value of shares that
may yet be
repurchased under
the program (a) (b) (c)
($ in millions)

1,779

2,148

3,106

7,033

24.77

26.33

28.74

27.00

1,779

2,148

3,106

7,033

526

470

380

Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(a)
(b) Excludes brokerage commissions.
(c) On June 28, 2017, we announced a common stock repurchase program of up to $760 million. The program commenced in the third quarter of 2017 and

will expire on June 30, 2018.

Ally Financial Inc. • Form 10-K

Item 6. Selected Financial Data

The selected historical financial information set forth below should be read in conjunction with Management’s Discussion and Analysis

of Financial Condition and Results of Operations (MD&A) in Part II, Item 7 of this report, and our Consolidated Financial Statements and the
notes thereto. The historical financial information presented may not be indicative of our future performance.

The following table presents selected Consolidated Statement of Income, earnings per common share, and market price data.

($ in millions, except per share data; shares in thousands)

2017

2016

2015

2014

2013

Total financing revenue and other interest income

8,322

8,305

8,397

8,391

Total interest expense

Net depreciation expense on operating lease assets

Net financing revenue and other interest income

Total other revenue

Total net revenue

Provision for loan losses

Total noninterest expense

Income from continuing operations before income tax expense

(benefit)

Income tax expense (benefit) from continuing operations (a)

Net income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Basic earnings per common share (b) (c):

Net income (loss) from continuing operations

Net income (loss)

Weighted-average common shares outstanding

Diluted earnings per common share (b) (c):

Net income (loss) from continuing operations

Net income (loss)

Weighted-average common shares outstanding (d)

Market price per common share (c):

High closing

Low closing

Period-end closing

Cash dividends declared per common share

Period-end common shares outstanding

2,857

1,244

4,221

1,544

5,765

1,148

3,110

1,507

581

926

929

2.04

2.05

453,704

2.03

2.04

2,629

1,769

3,907

1,530

5,437

917

2,939

1,581

470

1,111

(44)

1,067

2.25

2.15

2,429

2,249

3,719

1,142

4,861

707

2,761

1,393

496

897

392

2,783

2,233

3,375

1,276

4,651

457

2,948

1,246

321

925

225

1,289

1,150

(3.47) $

(2.66)

1.36

1.83

481,105

482,873

481,155

2.24

2.15

(3.47) $

(2.66)

1.36

1.83

8,093

3,319

1,995

2,779

1,484

4,263

501

3,405

357

(59)

416

(55)

361

(1.51)

(1.64)

420,166

(1.51)

(1.64)

455,350

482,182

482,873

481,934

420,166

29.41

20.40

23.88

18.22

29.16

0.40

14.90

19.02

0.16

18.33

18.64

— $

25.21

20.12

23.62

—

437,054

467,000

481,980

480,095

(a) As a result of the Tax Cuts and Jobs Act of 2017 (the Tax Act) an additional $119 million of tax expense was incurred during 2017 as further described in

(b)

(c)

Note 23 to the Consolidated Financial Statements.
Includes shares related to share-based compensation that vested but were not yet issued for the years ended December 31, 2017, 2016, 2015, and 2014.
Preferred stock dividends for the year ended December 31, 2015, include $2,364 million recognized in connection with the partial redemption of the
Series G Preferred Stock and the repurchase of the Series A Preferred Stock. These dividends represent an additional return to preferred stockholders
calculated as the excess consideration paid over the carrying amount derecognized.
In April 2014, we completed an initial public offering (IPO) of 95 million shares of common stock at $25 per share. In connection with the IPO, we
effected a 310-for-one stock split on shares of our common stock, $0.01 par value per share. Accordingly, these references to share and per share amounts
relating to common stock have been adjusted, on a retroactive basis, to recognize the 310-for-one stock split.

(d) Due to antidilutive effect of the net loss from continuing operations attributable to common stockholders for the year ended December 31, 2015, and

2013, basic weighted-average common shares outstanding were used to calculate basic and diluted earnings per share.

Ally Financial Inc. • Form 10-K

The following table presents selected Consolidated Balance Sheet and ratio data.

December 31, ($ in millions)

Selected period-end balance sheet data:

Total assets

Total deposit liabilities

Long-term debt

Preferred stock

Total equity

Financial ratios:

Return on average assets (a)

Return on average equity (a)

Equity to assets (a)

Common dividend payout ratio (b)

Net interest spread (a) (c) (d)

Net yield on interest-earning assets (a) (d) (e)

2017

2016

2015

2014

2013

$ 167,148

$ 163,728

$ 158,581

$ 151,631

$ 150,908

$ 93,256

$ 79,022

$ 44,226

$ 54,128

66,478

66,234

— $

696

$ 13,494

$ 13,317

13,439

58,203

66,380

1,255

15,399

53,326

69,230

1,255

14,208

0.57%

6.89%

8.28%

19.51%

2.58%

2.71%

0.68%

7.80%

8.69%

7.44%

2.49%

2.63%

0.84%

8.69%

9.65%

—%

2.44%

2.57%

0.77%

7.77%

9.86%

—%

2.26%

2.41%

0.23%

1.92%

12.02%

—%

1.73%

2.03%

(a) The ratios were based on average assets and average equity using a combination of monthly and daily average methodologies.
(b) Common dividend payout ratio was calculated using basic earnings per common share.
(c) Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities, excluding

discontinued operations for the periods shown.

(d) Amounts for the years ended December 31, 2015, 2014, and 2013, were adjusted to include previously excluded equity investments and related income on

equity investments. Refer to the section titled Statistical Tables within MD&A for additional information.

(e) Net yield on interest-earning assets represents net financing revenue and other interest income as a percentage of total interest-earning assets.

Ally Financial Inc. • Form 10-K

As of January 1, 2015, Ally became subject to the rules implementing the 2010 Basel III capital framework in the United States (U.S.

Basel III), which reflect new and higher capital requirements, capital buffers, and new regulatory capital definitions, deductions and
adjustments. Certain aspects of U.S. Basel III, including the new capital buffers and regulatory capital deductions, are subject to a phase-in
period through December 31, 2018. To assess our capital adequacy against the full impact of U.S. Basel III, we also present “fully phased-in”
information that reflects regulatory capital rules that will take effect as of January 1, 2019. Refer to Note 21 to the Consolidated Financial
Statements for further information. The following table presents selected regulatory capital data.

December 31, ($ in millions)

2017

2016

2015

2017

2016

2015

2014

2013

Under Basel III (a)

Transitional

Fully phased-in (b)

Under Basel I (c)

Common Equity Tier 1 capital ratio

9.53%

9.37%

11.25% 10.93%

12.94% 12.57%

9.21%

11.10%

12.52%

9.46%

9.13%

11.22% 10.88%

12.91% 12.52%

8.74%

11.06%

12.47%

9.64%

12.55%

13.24%

8.84%

11.79%

12.76%

Tier 1 capital ratio

Total capital ratio

Tier 1 leverage ratio (to adjusted
quarterly average assets) (d)

Total equity

Preferred stock

Goodwill and certain other

intangibles

Deferred tax assets arising from net
operating loss and tax credit
carryforwards (e)

Other adjustments

9.53%

9.54%

9.73%

9.53%

9.73%

10.94%

10.23%

$ 13,494

$ 13,317

$ 13,439

$ 13,494

$ 13,317

$ 13,439

$ 15,399

$ 14,208

—

(696)

—

(696)

(1,255)

(283)

(272)

(27)

(294)

(293)

(27)

(224)

250

(410)

343

(392)

183

(280)

250

(683)

343

(980)

183

(1,310)

(1,639)

(219)

Common Equity Tier 1 capital

13,237

12,978

12,507

13,170

12,684

11,919

12,588

11,366

Preferred stock

Trust preferred securities

Deferred tax assets arising from net
operating loss and tax credit
carryforwards

Other adjustments

Tier 1 capital

Qualifying subordinated debt and
other instruments qualifying as
Tier 2

Qualifying allowance for credit
losses and other adjustments

—

2,491

—

2,489

696

2,520

—

2,491

—

2,489

696

2,520

1,255

2,546

1,255

2,544

(56)

(44)

(273)

(47)

(588)

(58)

—

(44)

—

(47)

—

(58)

—

15,628

15,147

15,077

15,617

15,126

15,077

16,389

15,165

1,113

1,174

1,233

1,098

932

996

1,113

1,174

1,233

1,098

932

996

237

668

271

969

Total capital

$ 17,974

$ 17,419

$ 17,005

$ 17,963

$ 17,398

$ 17,005

$ 17,294

$ 16,405

Risk-weighted assets (f)

$138,933

$138,539

$135,844

$139,185

$138,987

$136,354

$130,590

$128,575

(a) U.S. Basel III became effective for us on January 1, 2015, subject to transitional provisions primarily related to deductions and adjustments impacting

Common Equity Tier 1 capital and Tier 1 capital. On November 21, 2017, the FRB and other U.S. banking agencies finalized a rule that extends the
period for applying existing capital requirements to a targeted set of items that are subject to transition provisions under U.S. Basel III. Specifically, the
rule indefinitely postpones certain remaining phase-in requirements for capital deductions and adjustments for investments in unconsolidated financial
institutions, mortgage servicing assets, and certain deferred tax assets, none of which have a material impact on our regulatory capital position.

(b) Our fully phased-in capital ratios are non-GAAP financial measures that management believes are important to the reader of the Consolidated Financial
Statements but should be supplemental to, and not a substitute for, primary GAAP measures. The fully phased-in capital ratios are compared to the
transitional capital ratios above. We believe these capital ratios are important because we believe investors, analysts, and banking regulators may assess
our capital utilization and adequacy using these ratios. Additionally, presentation of these ratios allows readers to compare certain aspects of our capital
utilization and adequacy on the same basis to other companies in the industry.

(c) Capital ratios as of and prior to December 31, 2014, are presented under the U.S. Basel I capital framework.
(d) Tier 1 leverage ratio equals Tier 1 capital divided by adjusted quarterly average total assets (which reflects adjustments for disallowed goodwill, certain

intangible assets, and disallowed deferred tax assets).

(e) Contains deferred tax assets required to be deducted from capital under U.S. Basel III.
(f) Risk-weighted assets are defined by regulation and are generally determined by allocating assets and specified off-balance sheet exposures into various

risk categories.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice About Forward-Looking Statements and Other Terms

From time to time we have made, and in the future will make, forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts.
Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “pursue,” “seek,” “continue,” “estimate,”
“project,” “outlook,” “forecast,” “potential,” “target,” “objective,” “trend,” “plan,” “goal,” “initiative,” “priorities,” or other words of
comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements
convey our expectations, intentions, or forecasts about future events, circumstances, or results.

This report, including any information incorporated by reference in this report, contains forward-looking statements. We also may make

forward-looking statements in other documents that are filed or furnished with the SEC. In addition, we may make forward-looking
statements orally or in writing to investors, analysts, members of the media, or others.

All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and
many of which are beyond our control. You should not rely on any forward-looking statement as a prediction or guarantee about the future.
Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any
forward-looking statement. While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual
results or other future events or circumstances to differ from those in forward-looking statements include:

•

evolving local, regional, national, or international business, economic, or political conditions;

changes in laws or the regulatory or supervisory environment, including as a result of recent financial services legislation,
regulation, or policies or changes in government officials or other personnel;

changes in monetary, fiscal, or trade laws or policies, including as a result of actions by government agencies, central banks, or
supranational authorities;

changes in accounting standards or policies, including CECL;

changes in the automotive industry or the markets for new or used vehicles, including the rise of vehicle sharing and ride hailing,
the development of autonomous and alternative-energy vehicles, and the impact of demographic shifts on attitudes and behaviors
toward vehicle ownership and use;

disruptions or shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including financial or
systemic shocks and volatility or changes in market liquidity, interest or currency rates, or valuations;

changes in business or consumer sentiment, preferences, or behavior, including spending, borrowing, or saving by businesses or
households;

changes in our corporate or business strategies, the composition of our assets, or the way in which we fund those assets;

our ability to execute our business strategy for Ally Bank, including its digital focus;

our ability to optimize our automotive finance and insurance businesses and to continue diversifying into and growing other
consumer and commercial lines of business, including mortgage finance, corporate finance, brokerage, and wealth management;

our ability to develop capital plans that will be approved by the FRB and our ability to implement them, including any payment of
dividends or share repurchases;

our ability to effectively manage capital or liquidity consistent with evolving business or operational needs, risk management
standards, and regulatory or supervisory requirements;

our ability to cost-effectively fund our business and operations, including through deposits and the capital markets;

changes in any credit rating assigned to Ally, including Ally Bank;

adverse publicity or other reputational harm to us or our senior officers;

our ability to develop, maintain, or market our products or services or to absorb unanticipated costs or liabilities associated with
those products or services;

our ability to innovate, to anticipate the needs of current or future customers, to successfully compete, to increase or hold market
share in changing competitive environments, or to deal with pricing or other competitive pressures;

the continuing profitability and viability of our dealer-centric automotive finance and insurance businesses, especially in the face of
competition from captive finance companies and their automotive manufacturing sponsors and challenges to the dealer’s role as
intermediary between manufacturers and purchasers;

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

•

our ability to appropriately underwrite loans that we originate or purchase and to otherwise manage credit risk;

changes in the credit, liquidity, or other financial condition of our customers, counterparties, service providers, or competitors;

our ability to effectively deal with economic, business, or market slowdowns or disruptions;

judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to,
us or the financial services industry;

our ability to address stricter or heightened regulatory or supervisory requirements and expectations;

the performance and availability of third-party service providers on whom we rely in delivering products and services to our
customers and otherwise conducting our business and operations;

our ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or
infrastructure, including our capacity to withstand cyberattacks;

the adequacy of our corporate governance, risk management framework, compliance programs, or internal controls over financial
reporting, including our ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage
operational risk;

the efficacy of our methods or models in assessing business strategies or opportunities or in valuing, measuring, estimating,
monitoring, or managing positions or risk;

our ability to keep pace with changes in technology that affect us or our customers, counterparties, service providers, or
competitors;

our ability to successfully make and integrate acquisitions;

the adequacy of our succession planning for key executives or other personnel and our ability to attract or retain qualified
employees;

natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics; or

other assumptions, risks, or uncertainties described in the Risk Factors (Item 1A), Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Item 7), or the Notes to the Consolidated Financial Statements (Item 8) in this
Annual Report on Form 10-K or described in any of the Company’s annual, quarterly or current reports.

Any forward-looking statement made by us or on our behalf speaks only as of the date that it was made. We do not undertake to update
any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made,
except as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking
nature) that we may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.

Overview

Ally Financial Inc. (together with its consolidated subsidiaries unless the context requires otherwise, Ally, the Company, or we, us, or

our) is a leading digital financial services company and top 25 U.S. financial holding company (FHC) offering diversified financial products
and services for consumers, businesses, automotive dealers, and corporate clients. Ally operates with a distinctive brand, an innovative
approach, and a relentless focus on our customers. We are a Delaware corporation and are registered as a bank holding company (BHC) under
the Bank Holding Company Act of 1956 as amended and an FHC under the Gramm-Leach-Bliley Act of 1999 as amended. We are one of the
largest full service automotive finance operations in the country with a legacy that dates back to 1919, a deep expertise in automotive lending,
and a complementary automotive-focused insurance business. Our wholly-owned banking subsidiary, Ally Bank, has received numerous
industry awards for its services and capabilities and is one of the largest and most respected online banks, uniquely positioned for the
observed shifting trends in consumer banking preferences for digital banking. Ally Bank’s assets and operating results are included within our
Automotive Finance, Mortgage Finance, and Corporate Finance segments, as well as Corporate and Other, based on its underlying business
activities.

We offer mortgage lending services and a variety of deposit and other banking products, including CDs, online savings, money market

and checking accounts, and IRA products. We also promote a cash back credit card. We have recently integrated a growing digital wealth
management and online brokerage platform to enable consumers to have a variety of options in managing their savings and wealth.
Additionally, through our corporate finance business, we primarily offer senior secured leveraged cash flow and asset-based loans to middle-
market companies.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Our Business
Dealer Financial Services

Dealer Financial Services includes our Automotive Finance and Insurance segments. Our primary customers are automotive dealers,
which are typically independently owned businesses. As part of the process of selling a vehicle, automotive dealers typically enter into retail
installment sales contracts and leases with their retail customers. Dealers then select Ally or another automotive finance provider to which
they sell those retail installment sales contracts and leases.

Our Dealer Financial Services is one of the largest full service automotive finance operations in the country and offers a wide range of

financial services and insurance products to approximately 18,500 automotive dealerships and approximately 4.3 million customers. We have
deep dealer relationships that have been built throughout our history of nearly 100 years, and we are leveraging competitive strengths to
expand our dealer footprint. Our dealer-centric business model encourages dealers to use our broad range of products through incentive
programs like our Ally Dealer Rewards program, which rewards individual dealers based on the depth and breadth of our relationship. Our
automotive finance services include providing retail installment sales contracts, loans and leases, offering term loans to dealers, financing
dealer floorplans and other lines of credit to dealers, warehouse lines to companies, fleet financing, providing financing to companies and
municipalities for the purchase or lease of vehicles and equipment, and vehicle remarketing services. We also offer retail VSCs and
commercial insurance primarily covering dealers’ wholesale vehicle inventories. We are a leading provider of VSCs, GAP, and vehicle
maintenance contracts (VMCs).

Automotive Finance

Our Automotive Finance operations provide U.S.-based automotive financing services to consumers and automotive dealers, and

automotive and equipment financing services to companies and municipalities. Our dealer-focused business model, value added products and
services, full spectrum lending, and business expertise proven over many credit cycles make us a premier automotive finance company. For
consumers, we provide retail financing and leasing for new and used vehicles, including recreational vehicles (RVs). In addition, our
Commercial Services Group (CSG) provides automotive financing for small businesses and automotive and equipment financing for
companies and municipalities. At December 31, 2017, our CSG and RV channels had $7.3 billion and $1.8 billion, respectively, of retail loans
outstanding. Through our commercial automotive financing operations, we fund dealer purchases of new and used vehicles through wholesale
floorplan financing. At December 31, 2017, our Automotive Finance operations had $114.1 billion of assets and generated $4.1 billion of total
net revenue in 2017. We manage commercial account servicing for approximately 3,800 dealers that utilize our floorplan inventory lending or
other commercial loans. We provide consumer asset servicing for a $79.7 billion portfolio at December 31, 2017. The extensive infrastructure,
technology, and analytics of our servicing operations as well as the experience of our servicing personnel enhance our ability to minimize our
loan losses and enable us to deliver a favorable customer experience to both our dealers and their retail customers. During 2017, we continued
to reposition our origination profile to focus on capital optimization and risk-adjusted returns. In 2017, total retail and lease originations were
$34.7 billion, a decline of $1.3 billion compared to 2016.

Our success as an automotive finance provider is driven by the consistent and broad range of products and services we offer to dealers

that originate loans and leases for their retail customers to acquire new and used vehicles. Ally and other automotive finance providers
purchase these loans and leases from automotive dealers, which are independently owned businesses and are the primary customers of our
automotive finance business. As the marketplace evolves, our growth strategy continues to focus on diversifying our operations by expanding
into different products, responding to the growing trends for a more streamlined and digital automotive financing process to serve both dealers
and consumers, and continuing to strengthen and expand our network of dealer relationships. To enhance our automotive finance offerings,
relationships, and digital capabilities, in 2017 we built upon the platform acquired from the 2016 purchase of Blue Yield and introduced
Clearlane, an online automotive lender exchange, expanding our direct-to-consumer capabilities and providing an end-to-end digital platform
for consumers seeking financing and dealers looking to drive online sales. In addition to providing a digital direct-to-consumer channel for
Ally to acquire automotive loans, Clearlane is a fee-based business that generates revenue by successfully referring leads to automotive
lenders and insurance providers, and enhances our ability to partner with other direct lending institutions and digital automotive distributors.
Additionally, we expanded our relationship with Carvana, a leading eCommerce platform for buying used cars, to provide up to
approximately $2.0 billion in purchases of retail installment sales contracts and warehouse financing for Carvana. We believe these actions
will enable us to respond to the growing trends for a more streamlined and digital automotive financing process to serve both dealers and
consumers.

The Growth channel was established as a formal channel in 2012 to focus on developing dealer relationships beyond our existing
relationships that primarily were developed through our role as a captive finance company historically for the GM and Chrysler brands, and
was recently expanded to include our direct-to-consumer lending offering, and other online automotive retailers. We have established
relationships with thousands of Growth channel dealers through our customer-centric approach and specialized incentive programs designed
to drive loyalty amongst dealers to Ally products and services. The success of the Growth channel has been a key enabler to converting our
business model from a focused captive finance company to a leading market competitor. In this channel, we currently have approximately
12,000 dealer relationships, of which nearly 11,000 are franchised dealers (from brands such as Ford, Nissan, Kia, Hyundai, Toyota, Honda,
and others), RV dealers, or used vehicle only retailers that have a national presence.

Over the past several years, we have continued to focus on the used vehicle segment primarily through franchised dealers, which has

resulted in used vehicle financing volume growth. The highly-fragmented used vehicle financing market, with a total financing opportunity
represented by over 270 million vehicles in operation, provides an attractive opportunity that we believe will further expand and support our
dealer relationships and increase our risk-adjusted return on retail loan originations. In January 2018, we expanded our relationship with

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

DriveTime, the nation’s second largest vehicle retailer focused solely on used vehicles, to provide up to $750 million for the purchase of retail
installment sales contracts.

For consumers, we provide retail automotive financing and leasing for new and used vehicles. Retail financing for the purchase of
vehicles generally takes the form of installment sales financing. During both 2017 and 2016, we originated a total of approximately 1.3
million automotive loans and leases, totaling approximately $34.7 billion and $36.0 billion, respectively. Since the end of 2014, we have
experienced growth in our consumer retail automotive loan portfolio and a significant reduction in lease assets. This shift in our portfolio mix
has contributed to an increase in provision expense for loan losses. Consumer lease residuals are not included in the allowance for loan losses
as changes in the expected residual values on consumer leases are included in depreciation expense over the remaining life of the lease. Our
risk to future fluctuations in used vehicle values has diminished in recent years as our lease assets have declined materially. As of
December 31, 2017, operating lease assets, net of accumulated depreciation, decreased 55%, to $8.7 billion, since December 31, 2014. While
all leases are exposed to potential reductions in used vehicle values, only loans where we take possession of the vehicle are affected by
potential reductions in used vehicle values.

Our consumer automotive financing operations generate revenue through finance charges or lease payments and fees paid by customers
on retail contracts and leases. When the lease contract is originated, we estimate the residual value of the leased vehicle at lease termination.
Periodically we revise the projected residual value of the leased vehicle at lease termination and adjust depreciation expense over the
remaining life of the lease if appropriate. Given the fluctuations in used vehicle values, our actual sales proceeds from remarketing the vehicle
may be higher or lower than the projected residual value which results in gains or losses on lease termination. During 2017, we recognized
$124 million of gains on lease terminations, compared to $213 million of gains in 2016. Remarketing gains decreased in 2017 due to lower
used vehicle prices and a decline in lease termination volume.

We continue to maintain a diverse mix of product offerings across a broad risk spectrum, subject to underwriting policies that reflect our

risk appetite. Our current operating results continue to increasingly reflect our ongoing strategy. The strategy to grow used vehicle financing
—the market opportunity for which has increased year over year with continued growth in used vehicle sales—has provided volume at lower
credit tiers, which to date has provided higher-yielding loans and an increase in provision expense in line with our expectations for credit
performance of the portfolio. While we predominately focus on prime-lending markets, we seek to be a meaningful lender to a wide spectrum
of borrowers and continue to carefully measure risk versus return. We place great emphasis on our risk management and risk-based pricing
policies and practices.

Our 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 our commercial automotive financing business. Wholesale
floorplan loans are secured by vehicles financed (and all other vehicle inventory), which provide strong collateral protection in the event of
dealership default. Additional collateral and/or other credit enhancements (e.g., personal guarantees from dealership owners) are typically
obtained to further mitigate credit risk. The amount we advance to dealers is equal to 100% of the wholesale invoice price of new vehicles.
Interest on wholesale automotive financing is generally payable monthly and is indexed to a floating rate benchmark. The rate for a particular
dealer is based on, among other considerations, competitive factors and the dealer’s creditworthiness. During 2017, we financed an average of
$31.6 billion of dealer vehicle inventory through wholesale floorplan financings. Other commercial automotive lending products, which
averaged $5.8 billion during 2017, consist of automotive dealer term loans, including those to finance dealership land and buildings, dealer
fleet financing, and other equipment financing. We also provide comprehensive automotive remarketing services, including the use of
SmartAuction, our online auction platform, which efficiently supports dealer-to-dealer and other commercial wholesale vehicle transactions.
In 2017, Ally and other parties, including dealers, fleet rental companies, and financial institutions, utilized SmartAuction to sell
approximately 356,000 vehicles to dealers and other commercial customers. SmartAuction served as the remarketing channel for 56% of
Ally’s off-lease vehicles.

Insurance

Our 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. As part of our focus on offering dealers a broad range of consumer
financial and insurance products, we provide VSCs, VMCs, GAP products, and other ancillary products desired by consumers. We also
underwrite selected commercial insurance coverages, which primarily insure dealers’ wholesale vehicle inventory. In the third quarter of
2017, we completed the national roll-out of ClearGuard, a new protection product designed to minimize the risk to dealers, on the
SmartAuction platform, of arbitration claims for eligible vehicles sold at auction. Additionally, during the third quarter of 2017, we were
awarded a long-term commitment to continue as the preferred VSC and protection plan provider for GM Canada. Our Insurance operations
had $7.5 billion of assets at December 31, 2017, and generated $1.1 billion of total net revenue in 2017.

In addition to our product offerings, we provide consultative services and training to assist dealers in optimizing Finance and Insurance
results, achieving high levels of customer satisfaction, and achieving regulatory compliance. Our services also include an advisory role to the
dealer relative to the necessary liability and physical damage coverages for a dealership.

Our 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 VSCs cover virtually all vehicle makes and models. We also offer GAP products, which allow the recovery of a specified
economic loss beyond the covered vehicle’s value in the event the vehicle is damaged or stolen and declared a total loss. We continue to

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

evolve our product suite and digital capabilities to position our business for future opportunities through growing third-party relationships and
sales through our online automotive lending exchange Clearlane.

Ally Premier Protection is our flagship vehicle service contract offering which was launched nationwide in June 2015, and provides

coverage for new and used vehicles of virtually all makes and models. As we broadened our business beyond GM, Ally Premier Protection
replaced the General Motors Protection Plan nameplate, which was discontinued in 2016.

Wholesale vehicle inventory insurance for dealers provides physical damage protection for dealers’ floorplan vehicles. Among dealers to

whom we provide wholesale financing, our wholesale insurance product penetration rate is approximately 79%. Dealers who receive
wholesale financing from Ally are eligible for wholesale insurance incentives, such as automatic eligibility in our preferred insurance
programs. In April 2017, we entered into a one-year reinsurance agreement to obtain excess of loss coverage for our vehicle inventory
insurance product, including catastrophe coverage for weather-related events, to help manage our level of risk.

A significant aspect of our Insurance operations is the investment of proceeds from premiums and other revenue sources. We use these

investments to satisfy our obligations related to future claims at the time these claims are settled. Our Insurance operations have an
Investment Committee, which develops investment guidelines and strategies. The guidelines established by this committee reflect our risk
appetite, liquidity requirements, regulatory requirements, and rating agency considerations, among other factors.

Mortgage Finance

Our Mortgage Finance operations consist of held-for-investment and held-for-sale consumer mortgage finance loan portfolios. We
acquire mortgage loans through two primary channels including bulk purchases of high-quality jumbo and low-to-moderate income (LMI)
mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings through Ally Home. The combination of our bulk
portfolio purchase program and our direct-to-consumer strategy provides the capacity to expand revenue sources and further grow and
diversify our finance receivable portfolio with an attractive asset class while also deepening relationships with existing Ally customers.

Our bulk loan purchase program acquires loans beyond our current customer base and seeks to purchase only from sellers with the

financial capacity to support strong representations and warranties and who have the industry knowledge and experience to originate high-
quality assets. Our bulk loan purchases are held-for-investment. During the year ended December 31, 2017, we purchased $4.5 billion of
mortgage loans that were originated by third parties. Through our direct-to-consumer channel, introduced late in 2016, we offer a variety of
competitively-priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third-party fulfillment partner. In March
2017, we broadened our product suite with the addition of the HomeReady® mortgage loan, a Fannie Mae product designed to serve
creditworthy, low- to moderate-income borrowers. Under our current arrangement, our direct-to-consumer conforming mortgages are
originated as held-for-sale and sold, while jumbo mortgages are originated as held-for-investment.

Currently, all servicing for our portfolios of mortgage loans is performed by a third party and no mortgage servicing rights are created.
Our Mortgage Finance operations had $11.7 billion of assets at December 31, 2017, and generated $136 million of total net revenue in 2017.

Corporate Finance

Our Corporate Finance operations primarily provide senior secured leveraged cash flow and asset-based loans to mostly U.S.-based
middle market companies. We believe our attractive deposit-based funding model coupled with our expanded product offerings and deep
industry relationships provide an advantage over our competition, which includes other banks as well as publicly and privately held finance
companies. Our Corporate Finance lending portfolio is almost entirely composed of first lien, first out loans. Our primary focus is on
businesses owned by private equity sponsors with loans typically used for leveraged buyouts, mergers and acquisitions, debt refinancing,
restructurings, and working capital. The portfolio is well diversified across multiple industries including retail, manufacturing, distribution,
service companies, and other specialty sectors. These specialty sectors include our Healthcare and Technology Finance verticals. The
Healthcare vertical provides financing across the healthcare spectrum including services, pharmaceuticals, manufacturing, and medical
devices and supplies. Our Technology Finance vertical, which was launched in the fourth quarter of 2015, provides financing solutions to
venture capital-backed, technology-based companies. Additionally, in 2017 we launched a commercial real estate product focused on lending
to skilled nursing facilities, senior housing, medical office buildings, and hospitals. Our target commitment hold level for individual
exposures ranges from $20 million to $100 million for individual borrowers, depending on product type. We also selectively arrange larger
transactions that we may retain on-balance sheet or syndicate to other lenders. By syndicating loans to other lenders, we are able to provide
larger financing commitments to our customers and generate loan syndication fee income while limiting our risk exposure to individual
borrowers. Loan facilities typically include both a revolver and term loan component. All of our loans are floating rate facilities with
maturities ranging from two to seven years. In certain instances, we may be offered the opportunity to make small investments in our
borrowers, where we could benefit from potential appreciation in the company’s value. Another smaller complementary product offering that
helps strengthen our reputation as a full spectrum provider of financing solutions for borrowers includes selectively offering second out loans
on certain transactions and issuing letters of credit through Ally Bank.

As we continue to strengthen our origination platform and expand into additional product offerings, we have prudently grown our
lending portfolio while maintaining credit discipline as we believe this asset class offers attractive returns and diversification benefits to our
broader lending portfolio. Our Corporate Finance operations had $4.0 billion of assets at December 31, 2017, and generated $212 million of
total net revenue in 2017.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Corporate and Other

Corporate and Other primarily consists of centralized corporate treasury activities such as 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 our corporate funds-transfer pricing (FTP) and treasury asset liability management (ALM)
activities. Corporate and Other also includes activity related to the Ally CashBack credit card, certain equity investments, which primarily
consist of Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock, the management of our legacy mortgage portfolio,
which primarily consists of loans originated prior to January 1, 2009, and reclassifications and eliminations between the reportable operating
segments.

In May 2017, we launched Ally Invest, our digital brokerage and wealth management offering that combines the platform we acquired

from the acquisition of TradeKing Group, Inc. (TradeKing) in June 2016 with our award-winning online banking products in a single,
convenient customer experience that provides low-cost investing with competitive deposit products. Through Ally Invest, we are able to offer
a broader array of personal finance products through a fully-integrated digital consumer platform centered around self-directed products and
digital advisory services. Our value proposition is based on the combination of attractive pricing, a broad product offering for active and
passive investors, and outstanding client-focused and user-friendly customer service that is accessible 24 hours a day, seven days a week, via
the phone, web or email—consistent with the Ally brand.

Ally Invest provides clients with services including self-directed trading for a variety of securities including stocks, options, 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 currently held in their accounts as collateral. Through Ally Invest Forex, we offer
self-directed investors and traders the ability to trade over fifty currency pairs through a state-of-the-art forex trading platform. Through Ally
Invest Futures, we provide investors and traders with access to futures markets and the ability to trade a variety of futures contracts including
metals, commodities, agriculture, global indices, bonds, and currencies.

Ally Invest also provides digital advisory services to clients through web-based solutions, informational resources, and virtual interaction

through Ally Invest Advisors, an SEC-registered investment advisor. These services have emerged as a fast-growing segment within the
financial services industry over the past several years. The program provides clients the opportunity to obtain professional portfolio
management services in return for a fee that is based upon the client’s assets under management (AUM). Ally Advisors consists of a number
of core managed portfolios that hold ETFs diversified across asset class, industry sector, and geography, which are customized for each client
based on risk tolerance, investment time horizon and wealth ratio.

Financial results related to our online brokerage operations are currently included within Corporate and Other.

The net financing revenue and other interest income of our Automotive Finance, Mortgage Finance, and Corporate Finance operations
includes the results of an FTP process that insulates these operations from interest rate volatility by matching assets and liabilities with similar
interest rate sensitivity and maturity characteristics. The FTP process assigns charge rates to the assets and credit rates to the liabilities within
our Automotive Finance, Mortgage Finance, and Corporate Finance operations, based on anticipated maturity and a benchmark rate curve
plus an assumed credit spread. The assumed credit spread represents the cost of funds for each asset class based on a blend of funding
channels available to the enterprise, including unsecured and secured capital markets, private funding facilities, and deposits. In addition, a
risk-based methodology is used to allocate equity to these operations.

Ally Bank Deposits

Ally Bank—our direct banking platform, is focused on growing a stable deposit base and deepening relationships with our 1.4 million
primary deposit customers driven by our compelling brand and strong value proposition. We obtain retail deposits directly from customers
through direct banking via the internet, telephone, mobile, and mail channels. We have grown our direct banking activities and established a
strong brand that is based on a promise of being straightforward, easy to use, and offering high-quality customer service. Ally has consistently
increased its share of the direct banking deposit market and remains one of the largest direct banks in terms of retail deposit balances. Our
segment results include cost of funds associated with product offerings. Noninterest costs associated with deposit gathering activities were
$263 million for the year ended December 31, 2017, and are allocated to each segment based on their relative balance sheets.

Our products and services are designed to develop long-term customer relationships and capitalize on the shift in consumer preference

for direct banking. Our direct online bank offers a full spectrum of deposit product offerings, such as savings and money market accounts,
interest-bearing checking accounts, certificates of deposit (CDs), including several raise-your-rate CD terms, individual retirement account
(IRA) deposit products, accounts for trust, Zelle® person-to-person payments services, eCheck remote deposit capture, and mobile banking.
In addition, brokered deposits are obtained through third-party intermediaries. At December 31, 2017, Ally Bank had $93.2 billion of
deposits, including $77.9 billion of retail deposits. Over the past several years, the continued growth of our retail base has contributed to a
more favorable mix of lower cost deposit-based funding. The recent growth in total deposits has been primarily attributable to our retail
deposit portfolio—particularly within retail CDs, as we capitalized on a shift in consumer preference from savings accounts to CDs. Our
savings and money market accounts also continued to grow in 2017. Strong retention rates and customer acquisition, reflecting the strength of
the brand, continue to drive growth in retail deposits. Moreover, our brokered deposit portfolio continued to grow, driven by the addition of
Ally Invest customer cash and an increase in brokered CDs. During 2017, the deposit base at Ally Bank grew $14.4 billion, an increase of
approximately 18% from December 31, 2016.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

We believe we are well-positioned to continue to benefit from the consumer driven-shift from branch banking to direct banking as
demonstrated by the growth we have experienced. Our 1.4 million deposit customers and 2.7 million retail bank accounts as of December 31,
2017, reflects an increase from 1.2 million and 2.3 million, respectively as compared to the same period in 2016. According to a 2017
American Bankers Association survey, 72% of customers prefer to do their banking most often via digital and other direct channels (internet,
mobile, telephone, and mail). Furthermore, over the past five years, estimated direct banking deposits as a percentage of the broader retail
deposits market increased by approximately 1.8 percentage points, from 6.3% to 8.1%. We have received a positive response to innovative
savings and other deposit products and have been recognized as a “best online bank” by industry and consumer publications. Ally Bank’s
competitive direct banking includes online and mobile banking features such as electronic bill pay, remote deposit, and electronic funds
transfer nationwide, with innovative interfaces such as banking through Alexa-enabled devices, and no minimum balance requirements.

In the future, we intend to continue to grow and invest in our direct online bank and further capitalize on the shift in consumer preference

for direct banking with expanded digital capabilities and customer-centric products that utilize advanced analytics for personalized
interactions and other technologies that improve efficiency, security, and the customer’s emotional connection to the brand. We are focused on
growing, deepening, and further leveraging the customer relationships and brand loyalty that exist with Ally Bank and its customers as a
catalyst for future loan and deposit growth, as well as revenue opportunities that arise from introducing Ally Bank deposit customers to our
digital wealth management offering, Ally Invest.

Funding and Liquidity

Our funding strategy largely focuses on maintaining a diversified mix of retail and brokered deposits, public and private asset-backed

securitizations, committed credit facilities, and public unsecured debt. These funding sources are managed across products, markets, and
investors to enhance funding flexibility and limit dependence on any one source, resulting in a more cost-effective long-term funding strategy.

Prudent expansion of asset originations at Ally Bank and continued growth of a stable deposit base continues to be the cornerstone of our
long-term liquidity strategy. Retail deposits provide a low-cost source of funds that are less sensitive to interest rate changes, market volatility,
or changes in our credit ratings than other funding sources. At December 31, 2017, deposit liabilities totaled $93.3 billion, which reflects an
increase of $14.2 billion. During the year, deposits as a percentage of total liability-based funding increased nine percentage points to 63% at
December 31, 2017.

In addition to building a larger deposit base, we continue to remain active in the securitization markets to finance our automotive loan

portfolios. During 2017, we issued $7.3 billion in secured funding backed by retail automotive loans, leases, and dealer floorplan automotive
assets. Secured funding transactions continue to be an attractive source of funding due to continued securitization structural efficiencies and
the established market. Additionally, for retail loans and leases, the term structure of the transaction locks in funding for a specified pool of
loans and leases. Once a pool of retail automotive loans is selected and placed into a securitization, the underlying assets and corresponding
debt amortize simultaneously resulting in committed and matched funding for the life of the asset. We manage the execution risk arising from
secured funding by maintaining a diverse investor base and maintaining committed secured facilities.

As we continue to migrate assets to Ally Bank and grow our bank funding capabilities, our reliance on parent company liquidity has been

reduced. At December 31, 2017, 82% of Ally’s total assets were within Ally Bank. This compares to approximately 75% as of December 31,
2016. Funding sources at the parent company generally consist of longer-term unsecured debt, asset-backed securitizations, and private
committed credit facilities. At December 31, 2017, we had $3.6 billion and $1.7 billion of unsecured long-term debt principal maturing in
2018 and 2019, respectively. We plan to reduce our reliance on market-based funding and continue to replace a significant portion of our
unsecured term debt with lower cost deposit funding.

The strategies outlined above have allowed us to build and maintain a conservative liquidity position. Total available liquidity at
December 31, 2017, was $18.1 billion. Absolute levels of liquidity decreased during 2017 as a result of liability and equity management
transactions.

Credit Strategy

Within our Automotive Finance operations, we are a full spectrum automotive finance lender with the majority of our loan originations

underwritten within the prime-lending markets. During 2017, our strategy for originations was to optimize the deployment of stockholder
capital by focusing on our risk-adjusted returns against available origination opportunities. Our loan originations resulting from our current
underwriting strategy continue to impact the composition of our overall portfolio by shifting the credit mix to reflect more used, higher loan-
to-value (LTV), extended term, Growth channel, nonprime, and nonsubvented business. Our Mortgage Finance operations acquire mortgage
loans through two primary channels including bulk purchases of high-quality jumbo and low-to-moderate income (LMI) mortgage loans
originated by third parties, as well as direct-to-consumer mortgage offerings through Ally Home. Our bulk loan purchase program acquires
loans beyond our current customer base and seeks to purchase only from sellers with the financial capacity to support strong representations
and warranties and who have the industry knowledge and experience to originate high-quality assets. Under our current arrangement, our
direct-to-consumer conforming mortgages are originated as held-for-sale and sold, while jumbo mortgages are originated as held-for-
investment. Currently, all servicing for our portfolios of mortgage loans is performed by a third party and no mortgage servicing rights are
created.

During the year ended December 31, 2017, the credit performance of our portfolios reflected our diversification through our

underwriting strategy. Total nonperforming consumer automotive loans increased slightly due to portfolio growth, but remained relatively
stable as compared to our outstanding consumer automotive finance receivables and loans. Net charge-offs of our consumer automotive assets

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

increased due to the seasoning of recent vintages entering their peak loss periods, reflecting our underwriting strategy to originate loans across
a broad credit spectrum and expand our risk-adjusted returns, as well as lower average sales proceeds on repossessed vehicles as compared to
2016. Total nonperforming commercial loans decreased primarily due to reductions within our Corporate Finance portfolio as a result of the
payoff of a larger loan and the recognition of a partial charge-off on a loan that was restructured during the year, as well as lower dealer
inventory levels in our commercial automotive portfolio year over year. While we experienced a small increase in our net charge-offs within
our Corporate Finance portfolio, commercial credit continues to perform favorably. We have completed our sixth consecutive year with the
net charge-off rate of our commercial automotive portfolio less than or equal to one basis point. The increase in total nonperforming consumer
mortgage loans was primarily due to the impact of the hurricanes that occurred during the third quarter of 2017, portfolio seasoning, and
growth of the portfolio. Our provision for loan losses increased to $1.1 billion in 2017 from $917 million in 2016. The increase was primarily
due to our consumer automotive portfolio and reflects higher net charge-offs realized as a result of our strategy to achieve higher risk-adjusted
returns by originating assets across a broad credit spectrum, and retail asset growth. Additionally, provision expense increased due to
estimated impacts of hurricanes that occurred during the third quarter of 2017, which most notably impacted our consumer automotive
portfolio.

During 2017, the U.S. economy continued to modestly expand and consumer confidence remained strong. The labor market remained

healthy during the year, with the unemployment rate falling to 4.1% as of December 31, 2017. Our credit portfolios will continue to be
impacted by the overall economy, used vehicle and housing price levels, unemployment levels, and their impact to our borrowers. We
experienced downward pressure on used vehicle values in 2017 and expect that may continue throughout 2018.

Discontinued Operations

During 2013 and 2012, certain disposal groups met the criteria to be presented as discontinued operations. The remaining activity relates

to previous discontinued operations for which we continue to have wind-down, legal, and minimal operational costs. For all periods
presented, the operating results for these operations have been removed from continuing operations. Refer to Note 3 to the Consolidated
Financial Statements for more details. The MD&A has been adjusted to exclude discontinued operations unless otherwise noted.

Primary Lines of Business

Dealer Financial Services, which includes our Automotive Finance and Insurance operations, Mortgage Finance, and Corporate Finance

are our primary lines of business. The following table summarizes the operating results excluding discontinued operations of each line of
business. Operating results for each of the lines of business are more fully described in the MD&A sections that follow.

Year ended December 31, ($ in millions)

2017

2016

2015

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

Total net revenue (loss)

Dealer Financial Services

Automotive Finance

Insurance

Mortgage Finance

Corporate Finance

Corporate and Other

Total

Income (loss) from continuing operations before income tax

expense

Dealer Financial Services

Automotive Finance

Insurance

Mortgage Finance

Corporate Finance

Corporate and Other

Total

n/m = not meaningful

4,068

3,971

1,118

1,097

136

212

231

147

125

3,664

1,090

114

(64)

5,765

5,437

4,861

1,220

1,380

168

114

(15)

157

(61)

1,335

211

(214)

1,507

1,581

1,393

(12)

(41)

(5)

n/m

(26)

n/m

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Consolidated Results of Operations

The following table summarizes our consolidated operating results excluding discontinued operations for the periods shown. Refer to the

operating segment sections of the MD&A that follows for a more complete discussion of operating results by line of business.

Year ended December 31, ($ in millions)

2017

2016

2015

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

Net financing revenue and other interest income

Total financing revenue and other interest income

8,322

8,305

Total interest expense

Net depreciation expense on operating lease assets

Net financing revenue and other interest income

Other revenue

Insurance premiums and service revenue earned

Gain on mortgage and automotive loans, net

Loss on extinguishment of debt

Other gain on investments, net

Other income, net of losses

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Insurance losses and loss adjustment expenses

Other operating expenses

Total noninterest expense

Income from continuing operations before income tax

expense

Income tax expense from continuing operations

Net income from continuing operations

n/m = not meaningful

2017 Compared to 2016

2,857

1,244

4,221

973

(7)

102

408

1,544

5,765

1,148

1,095

332

1,683

3,110

1,507

581

926

2,629

1,769

3,907

945

(5)

185

394

1,530

5,437

917

992

342

1,605

2,939

1,581

470

1,111

8,397

2,429

2,249

3,719

940

(357)

155

359

1,142

4,861

707

963

293

1,505

2,761

1,393

496

897

—

(9)

n/m

(40)

(45)

(25)

(10)

(5)

(6)

(5)

(24)

(17)

(1)

(8)

(76)

(30)

(3)

(17)

(7)

(6)

We earned net income from continuing operations of $926 million for the year ended December 31, 2017, compared to $1.1 billion for

the year ended December 31, 2016. During the year ended December 31, 2017, results were favorably impacted by higher net financing
revenue across all lending operations resulting from a continued focus on optimizing portfolio growth through pricing actions and originating
loans across a broader credit spectrum within our Automotive Finance operations, and growth within our Mortgage Finance and Corporate
Finance operations. Higher investment securities balances and a more favorable interest rate environment also contributed to higher yields on
our earnings assets. Results were also favorably impacted by higher gains on the sale of automotive loans and higher insurance premiums and
service revenue earned. These items were more than offset by runoff in our legacy GM operating lease portfolio, higher provision expense
related to our focus on originating across a broader credit spectrum with appropriate risk-adjusted returns, and estimated impacts from
hurricane related activity during the third quarter of 2017. Results were also unfavorably impacted by higher noninterest expense to support
the launch and growth of our consumer and commercial product offerings, technology and digital investments, and lower realized gains on
investments. Additionally, net income was unfavorably impacted by $119 million of income tax expense driven primarily by a one-time
impact of the passage of tax reform legislation during the fourth quarter of 2017 as further described in Note 23 to the Consolidated Financial
Statements, and a nonrecurring tax benefit in the second quarter of 2016 due to a U.S. tax reserve release related to a prior-year federal return
that reduced our liability for unrecognized tax benefits by $175 million, both of which were partially offset by changes to our valuation
allowance relating to capital-in-nature deferred tax assets and foreign tax credit carryforwards.

Net financing revenue and other interest income increased $314 million for the year ended December 31, 2017, compared to the year

ended December 31, 2016. Income from our portfolio of investment securities and other earning assets, including cash and cash equivalents,
increased $204 million for the year ended December 31, 2017, due primarily to growth of investment securities balances as we continue to
utilize this portfolio to manage liquidity and generate a stable source of income. Net financing revenue and other interest income from our
Automotive Finance operations increased, despite continued runoff of our legacy GM lease portfolio, which we expect to be substantially
wound-down by the second quarter of 2018. Retail automotive financing revenue continued to benefit from our pricing actions and efforts to

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

reposition our origination profile to focus on capital optimization and risk-adjusted returns, as well as higher average retail asset levels.
Commercial automotive financing revenue also increased during the period due to higher benchmark interest rates and an increase in average
outstanding floorplan assets. Net financing revenue and other interest income within our Mortgage Finance operations was favorably
impacted in 2017 by increased portfolio loan balances as a result of bulk purchases of high-quality jumbo and LMI mortgage loans and direct-
to-consumer originations. Net financing revenue and other interest income within our Corporate Finance operations was favorably impacted
in 2017 by our strategy to responsibly grow assets and our product suite within existing verticals while selectively pursuing opportunities to
broaden industry and product diversification. Total interest expense increased 9% for the year ended December 31, 2017, compared to the
year ended December 31, 2016. While we continue to shift borrowings toward more cost-effective deposit funding and to reduce our
dependence on market-based funding through reductions in higher-cost secured and unsecured debt, interest expense increased as a result of
higher borrowing levels to support the business and due to higher market rates across funding sources. Our total deposit liabilities increased to
$93.3 billion as of December 31, 2017, as compared to $79.0 billion as of December 31, 2016.

Insurance premiums and service revenue earned increased to $973 million for the year ended December 31, 2017, as compared to $945
million for the year ended December 31, 2016, primarily due to higher vehicle inventory insurance rates and growth in our consumer finance
protection and insurance products, partially offset by ceding of premiums under a one-year reinsurance agreement we entered into in April
2017.

Gain on mortgage and automotive loans increased to $68 million for the year ended December 31, 2017, as compared to $11 million for

the year ended December 31, 2016. The increase was primarily driven by sales of certain previously written-down retail automotive loans
related to consumers in Chapter 13 bankruptcy where borrowers continue to make payments to proactively manage our overall credit
exposure, asset levels, and capital utilization.

Other gain on investments was $102 million for the year ended December 31, 2017, compared to $185 million for the year ended
December 31, 2016. The decrease was due primarily to higher levels of sales of investment securities in 2016 that did not recur in 2017.

Other income increased to $408 million for the year ended December 31, 2017, as compared to $394 million for the year ended
December 31, 2016. The increase for the year ended December 31, 2017, was primarily due to contributions from our Corporate Finance
operations, which included an $11 million equity investment gain in the first quarter of 2017 and an increase in loan syndication income, as
well as contributions from operations of Ally Invest included in our results subsequent to acquisition in the second quarter of 2016. This was
partially offset by a decrease in servicing fee income at our Automotive Finance operations resulting from lower levels of off-balance sheet
retail serviced assets.

The provision for loan losses was $1.1 billion for the year ended December 31, 2017, compared to $917 million for the year ended

December 31, 2016. The increase in provision for loan losses was primarily driven by our consumer automotive portfolio, where we
experienced higher net charge-offs as a result of our focus on originating across a broader credit spectrum by focusing on risk-adjusted
returns. Additionally, provision expense increased in 2017 due to retail asset growth and the estimated impacts of hurricane activity that
occurred during the third quarter of 2017, which most notably impacted our retail automotive loan portfolio. Refer to the Risk Management
section of this MD&A for further discussion.

Noninterest expense was $3.1 billion for the year ended December 31, 2017, compared to $2.9 billion for the year ended December 31,
2016. The increase was primarily driven by expenses related to the growth of our consumer and commercial products, including the addition
and integration of Ally Invest and Clearlane, as well as the expansion of our direct-to-consumer mortgage offering as we continue to enhance
our digital wealth management offering, expand our product suite, and grow digital platforms for consumers and dealers. This increase was
partially offset by lower insurance losses and loss adjustment expenses during the year ended December 31, 2017, compared to the year ended
December 31, 2016, primarily due to the ceding of weather-related losses subject to a reinsurance agreement.

We recognized total income tax expense from continuing operations of $581 million for the year ended December 31, 2017, compared to
$470 million for the year ended December 31, 2016. The increase in income tax expense for the year ended December 31, 2017, compared to
the year ended December 31, 2016, was primarily driven by $119 million of tax expense attributable to tax reform enacted on December 22,
2017, as further described in Note 23 to the Consolidated Financial Statements, and a nonrecurring tax benefit in the second quarter of 2016
due to a U.S. tax reserve release related to a prior-year federal return that reduced our liability for unrecognized tax benefits by $175 million.
The increase in tax expense was partially offset by changes to our valuation allowance relating to capital-in-nature deferred tax assets and
foreign tax credit carryforwards.

2016 Compared to 2015

We earned net income from continuing operations of $1.1 billion for the year ended December 31, 2016, compared to $897 million for

the year ended December 31, 2015. The increase was primarily due to an increase in net financing revenue and other interest income and
lower losses on the extinguishment of debt. Results for the year ended December 31, 2016, were also favorably impacted by increases in other
gain on investments and other income, and a decrease in income tax expense. This was partially offset by a decrease in gain on mortgage and
automotive loans, an increase in the provision for loan losses primarily due to a deliberate shift to originate loans across a broader credit
spectrum, an increase in insurance losses and loss adjustment expenses as a result of higher weather-related losses in 2016, and an increase in
other operating expenses.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Net financing revenue and other interest income increased $188 million for the year ended December 31, 2016, compared to the year
ended December 31, 2015. Net financing revenue and other interest income at our Automotive Finance operations was favorably impacted by
higher consumer financing revenue primarily due to the execution of our continued strategic focus on expanding risk-adjusted returns and an
increase in retail assets, as well as higher commercial financing revenue primarily resulting from an increase in dealer floorplan assets. The
increase was offset by a decrease in operating lease revenue, net of depreciation, primarily resulting from substantially lower lease
remarketing gains, and the runoff of our GM lease portfolio. Net financing revenue and other interest income at our Mortgage Finance
operations was favorably impacted by increased loan balances as a result of bulk purchases of high-quality jumbo and LMI mortgage loans.
Net financing revenue and other interest income at our Corporate Finance operations was favorably impacted by asset growth across all
business segments in line with our growth strategy. Total interest expense increased 8% for the year ended December 31, 2016, compared to
2015. Interest on deposits increased $112 million for the year ended December 31, 2016, compared to 2015, due to continued deposit growth.
Interest on debt increased $88 million for the year ended December 31, 2016, compared to 2015. The increase was primarily the result of
increased LIBOR rates and nonrecurring favorable debt hedging activity in 2015. The increases in interest expense for the year ended
December 31, 2016, were partially offset by the repayment of higher-cost legacy debt.

Gain on mortgage and automotive loans decreased $34 million for the year ended December 31, 2016, compared to the year ended
December 31, 2015. The change was primarily due to nonrecurring sales of legacy troubled debt restructuring (TDR) mortgage loans in 2015.

Loss on extinguishment of debt decreased $352 million for the year ended December 31, 2016, compared to the year ended December

31, 2015. The decrease was primarily due to the execution of tender offers for legacy, high-cost debt in 2015.

Other gain on investments was $185 million for the year ended December 31, 2016, compared to $155 million for the year ended

December 31, 2015. The increase was due primarily to an increase in sales of securities compared to the year ended December 31, 2015.

Other income increased $35 million for the year ended December 31, 2016, compared to 2015, primarily due to an increase in servicing

fee income at our Automotive Finance operations resulting from higher levels of off-balance sheet retail serviced assets.

The provision for loan losses was $917 million for the year ended December 31, 2016, compared to $707 million for the year ended
December 31, 2015. The increase in provision for loan losses was primarily due to higher net charge-offs and higher reserve requirements in
our consumer automotive portfolio as a result of our strategy to originate loans across a broader credit spectrum, and reserve releases within
the commercial automotive portfolio in the prior year due to strong portfolio performance in 2015. This was partially offset by lower reserve
requirements within our Mortgage Finance operations and lower loan growth in our consumer automotive portfolio. Refer to the Risk
Management section of this MD&A for further discussion.

Insurance losses and loss adjustment expenses increased $49 million for the year ended December 31, 2016, compared to the year ended

December 31, 2015. The increases were primarily due to severe hailstorms, which drove higher weather-related losses.

Other operating expenses increased $100 million for the year ended December 31, 2016, compared to the year ended December 31,
2015. The increase was primarily due to increased expenses from the integration of TradeKing, which was acquired on June 1, 2016, higher
FDIC deposit fees, and an increase in automotive collection and repossession expenses.

We recognized total income tax expense from continuing operations of $470 million for the year ended December 31, 2016, compared to

$496 million for the year ended December 31, 2015. The decrease in income tax expense for the year ended December 31, 2016, was driven
primarily by a tax benefit that resulted from a U.S. tax reserve release related to a prior year federal return that was settled in 2016 and
reduced our liability for unrecognized tax benefits. This tax benefit was partially offset by increases in tax expense attributable to higher
pretax earnings and the establishment of a valuation allowance against our capital loss carryforwards. The U.S. tax reserve release and
establishment of a valuation allowance caused significant differences in the usual relationship of income tax expense to pretax earnings.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Dealer Financial Services

Results for Dealer Financial Services are presented by reportable segment, which includes our Automotive Finance and Insurance

operations.

Automotive Finance
Results of Operations

The following table summarizes the operating results of our Automotive Finance operations. The amounts presented are before the

elimination of balances and transactions with our other reportable segments.

Year ended December 31, ($ in millions)

2017

2016

2015

Net financing revenue and other interest income

Consumer

Commercial

Loans held-for-sale

Operating leases

Other interest income

Total financing revenue and other interest income

Interest expense

Net depreciation expense on operating lease assets

Net financing revenue and other interest income

Other revenue

Gain (loss) on automotive loans, net

Other income

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Other operating expenses

Total noninterest expense

3,882

3,587

3,230

1,306

—

1,867

7,061

2,104

1,244

3,713

279

355

4,068

1,134

510

1,204

1,714

1,068

—

2,711

7,377

1,943

1,769

3,665

289

306

3,971

924

481

1,186

1,667

939

3,398

7,609

1,931

2,249

3,429

(23)

258

235

3,664

696

489

1,144

1,633

Income from continuing operations before income tax

expense

Total assets

n/m = not meaningful

1,220

114,089

1,380

116,347

1,335

115,636

Components of net operating lease revenue, included in amounts above, were as follows.

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

—

(31)

(45)

(4)

(8)

n/m

(3)

(23)

(6)

(2)

(3)

(12)

(2)

(100)

(20)

(3)

(1)

174

(33)

(4)

(2)

Year ended December 31, ($ in millions)

2017

2016

2015

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

Net operating lease revenue

Operating lease revenue

Depreciation expense

Depreciation expense on operating lease assets

(excluding remarketing gains)

Remarketing gains

Net depreciation expense on operating lease assets

Total net operating lease revenue

Investment in operating leases, net

1,867

2,711

3,398

(31)

1,368

(124)

1,244

623

8,741

1,982

(213)

1,769

942

11,470

2,600

(351)

2,249

1,149

16,271

(42)

(34)

(24)

(20)

(39)

(18)

(30)

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table presents the average balance and yield of the loan and lease portfolios of our Automotive Financing operations.

Year ended December 31, ($ in millions)

Finance receivables and loans, net (b)

Consumer automotive (c)

Commercial

Wholesale floorplan

Other commercial automotive (d)

Investment in operating leases, net (e)

2017

2016

2015

Average
balance (a)

Yield

Average
balance (a)

Yield

Average
balance (a)

Yield

66,502

5.80% $

64,230

5.52% $

60,549

5.27%

31,586

5,802

9,791

3.37

4.15

6.36

29,989

5,202

13,791

2.86

4.00

6.83

28,070

4,628

18,058

2.69

3.99

6.36

(a) Average balances are calculated using a daily average methodology.
(b) Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming

status, refer to Note 1 to the Consolidated Financial Statements.
Includes the effects of derivative financial instruments designated as hedges.

(c)
(d) Consists of automotive dealer term loans, including those to finance dealership land and buildings, dealer fleet financing, and other equipment financing.
(e) Yield includes gains on sale of $124 million, $213 million, $351 million, for the years ended December 31, 2017, 2016, and 2015, respectively. Excluding

these gains on sale, the yield would be 5.10%, 5.29%, and 4.42% for the years ended December 31, 2017, 2016, and 2015, respectively.

2017 Compared to 2016

Our Automotive Finance operations earned income from continuing operations before income tax expense of $1.2 billion for the year
ended December 31, 2017, compared to $1.4 billion for the year ended December 31, 2016. During the year ended December 31, 2017, we
continued to focus on pricing actions and repositioning our origination profile to focus on capital optimization and expanding risk-adjusted
returns. As a result, we experienced higher consumer financing revenue primarily due to an increase in consumer portfolio yields and assets.
We also experienced higher commercial financing revenue primarily due to higher yields resulting from higher benchmark interest rates.
Additionally, we realized an increase in gains on the sale of automotive loans of $59 million during the year ended December 31, 2017. These
favorable items were more than offset by a decrease in net operating lease revenue primarily resulting from the continued runoff of our legacy
GM lease portfolio, as well as less favorable remarketing activity for the year ended December 31, 2017, compared to 2016, due to lower
used vehicle prices and a decline in lease termination volume. We also experienced higher provision for loan losses resulting from higher net
charge-offs, driven by the changing composition of our portfolio associated with our focus on originating across a more broad credit
spectrum, higher retail asset levels, and the estimated impact of hurricane activities during the third quarter of 2017.

Consumer financing revenue increased $295 million for the year ended December 31, 2017, compared to 2016. The increase was
primarily due to improved portfolio yields as a result of the execution of our pricing actions and continued focus on expanding risk-adjusted
returns, as well as higher average retail loan balances.

Commercial financing revenue increased $238 million for the year ended December 31, 2017, compared to 2016. The increase was
primarily due to higher yields resulting from higher benchmark interest rates and an increase in average outstanding floorplan assets resulting
from higher average dealer inventory levels and vehicle prices. The increase was also due to an increase in non-floorplan dealer loan balances.

We recognized gains from the sale of automotive loans of $76 million for the year ended December 31, 2017, compared to $17 million

for 2016. During the year ended December 31, 2017, we sold certain previously written-down retail automotive loans related to consumers in
Chapter 13 bankruptcy where borrowers continue to make payments to proactively manage our overall credit exposure, asset levels, and
capital utilization. A portion of the total gains on sale for the year ended December 31, 2017, was offset within Corporate and Other as a result
of our FTP methodology.

Total net operating lease revenue decreased 34% for the year ended December 31, 2017, compared to 2016. The decrease was primarily

due to the runoff of our legacy GM lease portfolio, which we expect to be substantially wound-down by the second quarter of 2018. The
decrease was also due to less favorable remarketing activity. We recognized remarketing gains of $124 million for the year ended
December 31, 2017, compared to gains of $213 million for 2016. Remarketing gains decreased in 2017 due to lower used vehicle prices and a
decline in lease termination volume. Refer to the Lease Residual Risk Management section of this MD&A for further discussion.

The provision for loan losses was $1.1 billion for the year ended December 31, 2017, compared to $924 million for 2016. The increase in

provision for loan losses for the year ended December 31, 2017, was primarily due to higher net charge-offs in our consumer automotive
portfolio as a result of our focus on originating across a broader credit spectrum, retail asset growth, and the impact of hurricane activities
during the third quarter of 2017. Refer to the Risk Management section of this MD&A for further discussion.

2016 Compared to 2015

Our Automotive Finance operations earned income from continuing operations before income tax expense of $1.4 billion for the year
ended December 31, 2016, compared to $1.3 billion for the year ended December 31, 2015. Results for the year ended December 31, 2016,
were favorably impacted by higher consumer financing revenue primarily due to the execution of our continued strategic focus on expanding
risk-adjusted returns and an increase in retail assets, as well as higher commercial financing revenue primarily resulting from an increase in

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

dealer floorplan assets. The increase for the year ended December 31, 2016, was partially offset by an increase in provision for loan losses
primarily due to higher net charge-offs and higher overall reserve requirements due to the changing composition of our portfolio to a broader
credit spectrum, consistent with our underwriting strategy. In addition, the increase was partially offset by a decrease in net operating lease
revenue primarily resulting from lower gains per unit and the runoff of our GM lease portfolio.

Consumer financing revenue increased $357 million for the year ended December 31, 2016, compared to 2015. The increase was
primarily due to improved portfolio yields as a result of the execution of our continued strategic focus on expanding risk-adjusted returns and
higher average retail asset levels in 2016 as compared to 2015 due in particular to very strong loan originations in 2015.

Commercial financing revenue increased $129 million for the year ended December 31, 2016, compared to 2015. The increase was
primarily due to an increase in floorplan assets resulting from growing dealer vehicle inventories and higher average vehicle prices. The
increase was also due to higher benchmark rates and an increase in non-floorplan dealer loan balances.

Total net operating lease revenue decreased 18% for the year ended December 31, 2016, compared to 2015. The decrease was primarily

driven by substantially lower lease remarketing gains resulting from lower gains per unit, partially offset by an increase in termination
volume. The decrease was also due to lower net operating lease revenue as a result of GM portfolio runoff outpacing new lease originations.
We recognized remarketing gains of $213 million for the year ended December 31, 2016, compared to $351 million in 2015.

Other income increased 12% for the year ended December 31, 2016, compared to 2015, primarily due to an increase in servicing fee

income resulting from higher levels of off-balance sheet retail serviced assets.

The provision for loan losses was $924 million for the year ended December 31, 2016, compared to $696 million in 2015. The increase

was primarily due to higher net charge-offs and higher overall reserve requirements both due to the changing composition of our portfolio to a
broader credit spectrum consistent with our underwriting strategy and reserve releases within the commercial automotive portfolio in the year
ended December 31, 2015, due to strong portfolio performance in 2015. This was partially offset by lower loan growth in our consumer
automotive portfolio. Refer to the Risk Management section of this MD&A for further discussion.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Automotive Financing Volume

Our Automotive Finance operations provide automotive financing services to consumers and automotive dealers. For consumers, we
provide retail financing and leasing for new and used vehicles, and through our commercial automotive financing operations, we fund dealer
purchases of new and used vehicles through wholesale floorplan financing and provide dealer term loans and automotive fleet financing. In
2016, we expanded operations to include our direct-to-consumer lending option.

Acquisition and Underwriting

Our underwriting process is focused on multidimensional risk factors and data driven risk-adjusted probabilities that are continuously

monitored and routinely updated. Each application is placed into an analytical category based on specific aspects of the applicant’s credit
profile and loan structure. We then evaluate the application by applying a proprietary credit scoring algorithm tailored to its applicable
category. Inputs into this algorithm include, but are not limited to, proprietary scores and deal structure variables such as loan-to-value, new
or used vehicle collateral, and term of financing. The output of the algorithm is used to sort applications into various credit tiers (S, A, B, C,
D, and E). Credit tiers are used primarily to communicate to the dealer that submitted the application our preliminary indication of credit
quality and pricing. This process is built on long established credit risk fundamentals to determine both the borrower’s ability and willingness
to repay the loan. While advances in excess of 100% of the vehicle collateral value at loan origination—notwithstanding cash down and/or
vehicle trade in value—are very typical in the industry (primarily due to additional costs such as mechanical warranty contracts, taxes,
license, and title fees), our pricing, risk, and underwriting processes are rooted in statistical analysis to manage this risk.

In addition to our empirical approach of assessing risk, a majority of our applications are manually evaluated by an experienced team of

dedicated underwriters prior to the decision to underwrite the loan. We have developed an automated process to expedite the review of
applications with various combinations of credit factors that we have observed over time to substantially outperform or underperform in terms
of net credit losses. As a result, there are many clusters of credit factors that will lead to an automated decision, rather than a small set of
benchmark characteristics. Automated approvals are primarily limited to the highest quality credit tiers. For higher-risk transactions,
underwriters often verify details of the application such as borrower income and employment through documentation provided by the
borrower or alternative data sources from third parties.

Credit underwriters have a limited ability to approve exceptions to the guidelines contained in our underwriting criteria. Exceptions to
our credit policies must be approved by credit underwriters with appropriate credit authority. Approved applicants that do not comply with our
credit guidelines must have strong compensating factors that indicate a high willingness and ability of the applicant to repay the loan. For
example, underwriting exceptions may include allowing a longer term or a greater ratio of payment-to-income, debt-to-income, or loan-to-
value. We monitor exceptions to our underwriting criteria with the goal of limiting exceptions to a small portion of approved applications and
originated loans, and rarely permit more than a single exception to avoid layered risk.

Consumer Automotive Financing

We provide two basic types of financing for new and used vehicles: retail installment sale contracts (retail contracts) and lease contracts.

In most cases, we purchase retail contracts and leases for new and used vehicles from dealers when the vehicles are purchased or leased by
consumers. Our consumer automotive financing operations generate revenue through finance charges or lease payments and fees paid by
customers on the retail contracts and leases. In connection with lease contracts, we may also recognize a gain or loss on the remarketing of the
vehicle at the end of the lease.

The amount we pay a dealer for a retail contract is based on the negotiated purchase price of the vehicle and any other products, such as

service contracts, less any vehicle trade-in value, any down payment from the consumer, and any available automotive manufacturer
incentives. Under the retail contract, the consumer is obligated to make payments in an amount equal to the purchase price of the vehicle (less
any trade-in or down payment) plus finance charges at a rate negotiated between the consumer and the dealer. In addition, the consumer is
responsible for charges related to past-due payments. When we purchase the contract, it is normal business practice for the dealer to retain
some portion of the finance charge as income for the dealership. Our agreements with dealers place a limit on the amount of the finance
charges they are entitled to retain. Although we do not own the vehicles we finance through retail contracts, we hold a perfected security
interest in those vehicles.

With respect to consumer leasing, we purchase leases (and the associated vehicles) from dealerships. The purchase price of consumer

leases is based on the negotiated price for the vehicle less any vehicle trade-in, any down payment from the consumer, and any available
automotive manufacturer incentives. Under the lease, the consumer is obligated to make payments in amounts equal to the amount by which
the negotiated purchase price of the vehicle (less any trade-in value, down payment, or any available manufacturer incentives) exceeds the
contract residual value (including residual support) of the vehicle at lease termination, plus lease rental charges. The consumer is also
generally responsible for charges related to past due payments, excess mileage, excessive wear and tear, and certain disposal fees where
applicable. At contract inception, we determine pricing based on the projected residual value of the lease vehicle. This evaluation is primarily
based on a proprietary model, which includes variables such as vehicle age, expected mileage, seasonality, segment factors, vehicle type,
economic indicators, production cycle, automotive manufacturer incentives, and shifts in used vehicle supply. This internally-generated data
is compared against third-party, independent data for reasonableness.

Periodically, we revise the projected value of the leased vehicle at termination based on current market conditions and adjust

depreciation expense appropriately over the remaining life of the contract. At termination, our actual sales proceeds from remarketing the

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

vehicle may be higher or lower than the estimated residual value resulting in a gain or loss on remarketing recorded through depreciation
expense.

Our standard leasing plan, SmartLease, requires a monthly payment by the consumer. We also offer an alternative leasing plan,

SmartLease Plus, that requires one up-front payment of all lease amounts at the time the consumer takes possession of the vehicle.

Consumer leases are operating leases; therefore, credit losses on the operating lease portfolio are not as significant as losses on retail

contracts because lease credit losses are primarily limited to past due payments and assessed fees. Since some of these fees are not assessed
until the vehicle is returned, these losses on the lease portfolio are correlated with lease termination volume. Operating lease accounts over
30 days past due represented 1.41% and 1.33% of the portfolio at December 31, 2017, and 2016, respectively.

With respect to all financed vehicles, whether subject to a retail contract or a lease contract, we require that property damage insurance

be obtained by the consumer. In addition, for lease contracts, we require that bodily injury, collision, and comprehensive insurance be
obtained by the consumer.

During the year ended December 31, 2017, the credit performance of the consumer automotive portfolio reflected our underwriting
strategy to originate consumer automotive assets across a broad risk spectrum through multiple products including used, high LTV, extended
term, Growth channel, nonprime, and nonsubvented finance receivables and loans.

For the year ended December 31, 2017, our average buy rate for retail originations increased 42 basis points, relative to the year ended

December 31, 2016, and 93 basis points relative to the year ended December 31, 2015. We set our buy rates using a granular, risk-based
methodology factoring in several variables including interest costs, projected net average annualized loss rates at the time of origination,
anticipated operating costs, and targeted return on equity. The increase in our average buy rate was primarily the result of an increase to
interest rates and our strategy to increase our targeted return on equity and more focused deployment of stockholder capital. As a result of our
strategy to achieve higher risk-adjusted returns by originating consumer automotive assets across a broader credit spectrum, we incurred
higher provision expense and net charge-offs. The carrying value of our nonprime consumer automotive loans before allowance for loan
losses was $8.8 billion, or approximately 12.9% of our total consumer automotive loans at December 31, 2017, as compared to $9.1 billion,
or approximately 13.8% of our total consumer automotive loans at December 31, 2016.

The following table presents retail loan originations by credit tier.

Credit Tier (a)

Year ended December 31, 2017

Total retail originations

Year ended December 31, 2016

Total retail originations

Year ended December 31, 2015

Total retail originations

Volume
($ in billions)

% Share of
volume

Average
FICO®

11.0

12.4

5.9

1.1

30.4

10.6

13.6

6.8

1.6

32.6

12.7

13.8

7.2

2.4

0.2

36.3

100

754

668

641

608

690

760

669

642

608

688

753

670

636

600

571

687

(a) Represents Ally’s internal credit score, incorporating numerous borrower and structure attributes including: severity and aging of delinquency; number of

credit inquiries; loan-to-value ratio; and payment-to-income ratio. We periodically update our underwriting scorecard, which can have an impact on our
credit tier scoring. We originated an insignificant amount of retail loans classified as Tier D during the years ended December 31, 2017, and 2016; and
Tier E during the years ended December 31, 2017, 2016, and 2015.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table presents the percentage of total retail loan originations, in dollars, by the loan term in months.

Year ended December 31,

0–71

72–75

76 +

Total retail originations (a)

(a) Excludes RV loans.

2017

2016

2015

20%

100%

18%

100%

21%

100%

Retail originations with a term of 76 months or more represented 14% of total retail originations for the year ended December 31, 2017,

compared to 15%, for the same period in 2016. Substantially all of the loans originated with a term of 76 months or more during the years
ended December 31, 2017, 2016, and 2015, were considered to be prime and in credit tiers S, A, or B. We define prime retail automotive loans
primarily as those loans with a FICO® Score (or an equivalent score) at origination of 620 or greater.

The following table presents the percentage of total outstanding retail loans by origination year.

December 31,

Pre-2013

2013

2014

2015

2016

2017

Total

2017

2016

2015

13%

—

100%

The 2017, 2016, and 2015 vintages comprise 89% of the overall retail portfolio as of December 31, 2017, and have higher average buy
rates and expected losses than older vintages. The increases in average buy rate and expected loss were due to the execution of our targeted
underwriting strategy to originate consumer automotive assets across a broad risk spectrum, and our continued focus on expanding risk-
adjusted returns.

The following tables present the total retail loan and lease origination dollars and percentage mix by product type and by channel.

Year ended December 31, ($ in millions)

2017

2016

2015

2017

2016

2015

Consumer automotive
financing originations

% Share of Ally originations

Used retail

New retail standard

Lease

New retail subvented

15,698

15,259

14,842

14,587

16,993

19,220

4,237

163

3,385

367

4,702

2,244

Total consumer automotive financing originations (a) (b)

34,685

36,004

41,008

100

(a)

Includes CSG originations of $3.8 billion, $3.6 billion, and $3.8 billion for the years ended December 31, 2017, 2016, and 2015, respectively, and RV
originations of $459 million, $504 million, and $514 million for the years ended December 31, 2017, 2016, and 2015, respectively.

(b) On September 16, 2015, we entered into agreements with Mitsubishi Motors Credit of America, Inc. (MMCA) affiliates providing us the beneficial

interest in MMCA’s consumer loan and lease portfolio, which included $0.6 billion of retail and lease contracts in 2015. These assets have been excluded
from the amounts presented.

Consumer automotive
financing originations

% Share of Ally originations

Year ended December 31, ($ in millions)

2017

2016

2015

2017

2016

2015

Growth channel

GM dealers

Chrysler dealers

13,767

13,082

12,748

10,965

9,953

12,960

9,962

18,666

9,594

Total consumer automotive financing originations (a)

34,685

36,004

41,008

(a) Excludes consumer loans and leases purchased from MMCA of $0.6 billion in 2015.

100

During the year ended December 31, 2017, total consumer originations decreased $1.3 billion, compared to 2016. The decrease was due
to lower volume from the GM dealer channel with our continued focus on obtaining appropriate risk-adjusted returns over absolute levels of

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

originations. The decrease in GM volume during the year ended December 31, 2017, was partially offset by higher volume in the Growth
channel.

We have included origination metrics by loan term and FICO® Score within this MD&A. However, the proprietary way we evaluate risk

is based on multiple inputs as described in the section above titled Acquisition and Underwriting.

The following table presents the percentage of total retail loan and lease originations, in dollars, by FICO® Score.

Year ended December 31,

740 +

739–660

659–620

619–540

< 540

Unscored (a)

2017

2016

2015

26%

24%

26%

Total consumer automotive financing originations

100%

(a) Unscored are primarily CSG contracts with entities that have no FICO® Score.

Originations with a FICO® Score of less than 620 (considered nonprime) represented 10% and 11% of total consumer originations for

the years ended December 31, 2017, and 2016, respectively. Consumer loans and leases with FICO® Scores of less than 540 continued to
comprise only 1% of total originations for the year ended December 31, 2017. Nonprime applications that are not automatically declined by
our proprietary credit-scoring models for risk reasons are manually reviewed and decisioned by an experienced underwriting team. The
nonprime portfolio is subject to more stringent underwriting criteria for certain loan attributes (e.g., payment-to-income, mileage, and
maximum amount financed) and generally does not include any loans with a term of 76 months or more. For discussion of our credit risk
management practices and performance, refer to the section titled Risk Management.

Manufacturer Marketing Incentives

Automotive manufacturers may elect to sponsor incentive programs (on both retail contracts and leases) by supporting finance rates

below the standard market rates at which we purchase retail contracts. These marketing incentives are also referred to as rate support or
subvention. When automotive manufacturers utilize these marketing incentives, we are compensated at contract inception for the present
value of the difference between the customer rate and our standard rates. For retail loans, we defer and recognize this amount as a yield
adjustment over the life of the contract. For lease contracts, this payment reduces our cost basis in the underlying lease asset.

Under what we refer to as pull-ahead programs, consumers may be encouraged by the manufacturer to terminate leases early in

conjunction with the acquisition of a new vehicle. As part of these programs, we waive all or a portion of the customer’s remaining payment
obligation. Under most programs, the automotive manufacturer compensates us for a portion of the foregone revenue from the waived
payments that are offset partially to the extent that our remarketing sales proceeds are higher than otherwise would be realized if the vehicle
had been remarketed at lease contract maturity.

Servicing

We have historically serviced all retail contracts and leases we originated. However, our expansion into direct-to-consumer lending and
other relationships have resulted in the employment of third-party servicers for a small portion of the portfolio. On occasion, we have sold a
portion of the retail contracts we originated through whole-loan sales and securitizations, but generally retained the right to service and earn a
servicing fee for our servicing functions.

Servicing activities consist largely of collecting and processing customer payments, responding to customer inquiries such as requests for
payoff quotes, processing customer requests for account revisions (payment extensions and rewrites), maintaining a perfected security interest
in the financed vehicle, monitoring certain vehicle insurance coverages, and disposing of off-lease and repossessed vehicles. Servicing
activities are generally consistent across our Automotive Finance operations; however, certain practices may be influenced by local laws and
regulations.

Our customers have the option to receive monthly billing statements and remit payment by mail or through electronic fund transfers, or

to establish online web-based account administration through the Ally Account Center. Customer payments are processed by regional third-
party processing centers that electronically transfer payment information to customers’ accounts.

Collections activity includes initiating contact with customers who fail to comply with the terms of the retail contract or lease agreement
by sending reminder notices and/or contacting via telephone generally when an account becomes 3 to 15 days past due. The type of collection
treatment and level of intensity increases as the account becomes more delinquent. The nature and timing of these activities depend on the
repayment risk of the account.

During the collection process, we may offer a payment extension to a customer experiencing temporary financial difficulty. A payment
extension enables the customer to delay monthly payments for 30, 60, or 90 days, thereby deferring the maturity date of the contract by the

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

length of extension. Extensions granted to a customer typically do not exceed 90 days in the aggregate during any 12-month period or
180 days in aggregate over the life of the contract. During the deferral period, we continue to accrue and collect finance charges on the
contract as part of the deferral agreement. If the customer’s financial difficulty is not temporary and management believes the customer could
continue to make payments at a lower payment amount, we may offer to rewrite the remaining obligation, extending the term and lowering
the monthly payment obligation. In those cases, the principal balance generally remains unchanged while the interest rate charged to the
customer generally increases. The use of extensions and rewrites help mitigate financial loss in those cases where management believes the
customer will recover from short-term financial difficulty and resume regularly scheduled payments or can fulfill the obligation with lower
payments over a longer period. Before offering an extension or rewrite, collection personnel evaluate and take into account the capacity of the
customer to meet the revised payment terms. Generally, we do not consider extensions that fall within our policy guidelines to represent more
than an insignificant delay in payment and, therefore, they are not considered TDRs. Although the granting of an extension could delay the
eventual charge-off of an account, typically we are able to repossess and sell the related collateral, thereby mitigating the loss. At
December 31, 2017, 12.0% of the total amount outstanding in the servicing portfolio had been granted an extension or was rewritten,
compared to 9.4% at December 31, 2016. The increase was largely due to the impacts of hurricane activities experienced during the third
quarter of 2017.

Subject to legal considerations, we normally begin repossession activity once an account becomes greater than 70 days past due.
Repossession may occur earlier if management determines the customer is unwilling to pay, the vehicle is in danger of being damaged or
hidden, or the customer voluntarily surrenders the vehicle. Approved third-party repossession vendors handle the repossession activity. After
repossession, the customer is given a period of time to redeem or reinstate the vehicle by paying off the account or bringing the account
current, respectively. If the vehicle is not redeemed or reinstated, it is sold at auction. If the proceeds do not cover the unpaid balance,
including unpaid earned finance charges and allowable expenses, the resulting deficiency is charged-off. Asset recovery centers pursue
collections on accounts that have been charged-off, including those accounts where the vehicle was repossessed, and skip accounts where the
vehicle cannot be located.

At December 31, 2017, and 2016, our total consumer automotive serviced portfolio was $79.7 billion and $82.6 billion, respectively,
compared to our consumer automotive on-balance sheet serviced portfolio of $76.3 billion and $77.0 billion. Refer to Note 12 for further
information regarding servicing activities.

Remarketing and Sales of Leased Vehicles

When we acquire a consumer lease, we assume ownership of the vehicle from the dealer. Neither the consumer nor the dealer is

responsible for the value of the vehicle at the time of lease termination. When vehicles are not purchased by customers or the receiving dealer
at scheduled lease termination, the vehicle is returned to us for remarketing. We generally bear the risk of loss to the extent the value of a
leased vehicle upon remarketing is below the expected residual value. Our ability to efficiently process and effectively market off-lease
vehicles affects the disposal costs and the proceeds realized from vehicle sales. Our methods of vehicle sales at lease termination primarily
include the following:

•

Sale to dealer — After the lessee declines an option to purchase the off-lease vehicle, the dealer who accepts the returned off-lease
vehicle has the opportunity to purchase the vehicle directly from us at a price we define.

Internet auctions — Once the lessee and dealer decline their options to purchase, we offer off-lease vehicles to dealers and certain
other third parties through our proprietary internet site (SmartAuction). This internet sales program seeks to maximize the net sales
proceeds from off-lease vehicles by reducing the time between vehicle return and ultimate disposition, reducing holding costs, and
broadening the number of prospective buyers. We use the internet auction ourselves, and also maintain the internet auction site and
administer the auction process for third-party use. We earn a service fee for every third-party vehicle sold through SmartAuction,
which includes the cost of ClearGuard coverage, our protection product designed to minimize the risk to dealers of arbitration
claims for eligible vehicles. In 2017, approximately 356,000 vehicles were sold through the internet site.

Physical auctions — We dispose of our off-lease vehicles not purchased at termination by the lessee or dealer or sold on an internet
auction through traditional third-party, physical auctions. We are responsible for handling decisions at the auction including
arranging for inspections, authorizing repairs and reconditioning, and determining whether bids received at auction should be
accepted.

We employ an internal team, including statisticians, to manage our analysis of projected used vehicle values and residual risk. This team

aids in the pricing of new leases, managing the disposal process including vehicle concentration risk, geographic optimization of vehicles to
maximize gains, disposal platform (internet vs. physical), and evaluating our residual risk on a real-time basis. This team tracks market
movements of used vehicles using data down to the VIN level including trim and options, vehicle age, mileage, and seasonality factors that
we feel are more relevant than other published indices (e.g., Manheim, NADA, etc.). This analysis includes vehicles sold on Ally’s
SmartAuction platform, as well as vehicles sold through Manheim, ADESA, and over 200 independent physical auction sites. We believe this
analysis gives us a competitive advantage over our peers.

Commercial Automotive Financing
Automotive Wholesale Dealer Financing

One of the most important aspects of our dealer relationships is supporting the sale of vehicles through wholesale floorplan financing.
We primarily support automotive finance purchases by dealers of new and used vehicles manufactured or distributed before sale or lease to

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

the retail customer. Wholesale floorplan automotive financing, including syndicated loan arrangements, represents the largest portion of our
commercial automotive financing business and is the primary source of funding for dealers’ purchases of new and used vehicles.

Wholesale credit is arranged through lines of credit extended to individual dealers. Wholesale floorplan loans are secured by the vehicles

financed (and all other vehicle inventory), which provide strong collateral protection in the event of dealership default. Additional collateral
(e.g., blanket lien over all dealership assets) and/or other credit enhancements (e.g., personal guarantees from dealership owners) are generally
obtained to further mitigate credit risk. Furthermore, we benefit from automotive manufacturer repurchase arrangements, which serve as an
additional layer of protection in the event of repossession of dealership inventory and/or dealership franchise termination. The amount we
advance to dealers is equal to 100% of the wholesale invoice price of new vehicles, which includes destination and other miscellaneous
charges, and a price rebate, known as a holdback, from the manufacturer to the dealer in varying amounts stated as a percentage of the invoice
price. Interest on wholesale automotive financing is generally payable monthly. The majority of wholesale automotive financing is structured
to yield interest at a floating rate indexed to London interbank offer rate (LIBOR) or the Prime Rate. The rate for a particular dealer is based
on, among other things, competitive factors, the size of the account, and the dealer’s creditworthiness. Additionally, we make incentive
payments to certain commercial automotive wholesale borrowers under our Ally Dealer Rewards Program and account for these payments as
a reduction to interest income in the period they are earned.

Under the terms of the credit agreement with the dealer, we may demand payment of interest and principal on wholesale credit lines at
any time. However, unless we terminate the credit line or the dealer defaults or the risk and exposure warrant, we generally require payment
of the principal amount financed for a vehicle upon its sale or lease by the dealer to the customer.

Commercial Wholesale Financing Volume

The following table presents the percentage of average balance of our commercial wholesale floorplan finance receivables, in dollars, by

product type and by channel.

Year ended December 31, ($ in millions)

GM new vehicles

Chrysler new vehicles

Growth new vehicles

Used vehicles

Total

Total commercial wholesale finance receivables

Average balance

2017

2016

2015

50%

47%

49%

100%

$ 31,586

29,989

28,070

Average commercial wholesale financing receivables outstanding increased $1.6 billion during the year ended December 31, 2017,

compared to 2016. The increase was primarily due to higher average dealer inventory levels and an increase in the mix of trucks and sport
utility vehicles, which have higher average prices than cars. Dealer inventory levels are dependent on a number of factors including
manufacturer production schedules and vehicle mix, sales incentives, and industry sales—all of which can influence future wholesale
balances.

Other Commercial Automotive Financing

We also provide other forms of commercial financing for the automotive industry including automotive dealer term loans and automotive

fleet financing. Automotive dealer term loans are loans that we make to dealers to finance other aspects of the dealership business, including
acquisitions. These loans are usually secured by real estate and/or other dealership assets, and are typically personally guaranteed by the
individual owners of the dealership. Automotive fleet financing credit lines may be obtained by dealers, their affiliates, and other independent
companies that are used to purchase vehicles, which they lease or rent to others. In 2016, we began offering collateralized financing to mid-
market companies, corporations, and municipalities for purchases such as construction and energy equipment, business aircraft, marine,
healthcare equipment, rail cars, and more. Other commercial automotive loans, inclusive of our commercial lease portfolio, increased 12% to
an average of $5.8 billion for the year ended December 31, 2017.

Servicing and Monitoring

We service all of the wholesale credit lines in our portfolio and the wholesale automotive finance receivables that we have securitized. A
statement setting forth billing and account information is distributed on a monthly basis to each dealer. Interest and other nonprincipal charges
are billed in arrears and are required to be paid immediately upon receipt of the monthly billing statement. Generally, dealers remit payments
to us through ACH transactions initiated by the dealer through a secure web application.

Dealers are assigned a risk rating based on various factors, including capital sufficiency, operating performance, and credit and payment

history. The risk rating affects the amount of the line of credit and the ongoing risk management of the account. We monitor the level of
borrowing under each dealer’s credit line daily. We may adjust the dealer’s credit line if warranted, based on the dealership’s vehicle sales
rate, and temporarily suspend the granting of additional credit, or take other actions following evaluation and analysis of the dealer’s financial
condition.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

We periodically inspect and verify the existence of dealer vehicle inventories. The timing of these collateral audits varies, and no
advance notice is given to the dealer. Among other things, audits are intended to assess dealer compliance with the financing agreement and
confirm the status of our collateral.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Insurance
Results of Operations

The following table summarizes the operating results of our Insurance operations. The amounts presented are before the elimination of

balances and transactions with our other reportable segments.

Year ended December 31, ($ in millions)

Insurance premiums and other income

Insurance premiums and service revenue earned

Investment income, net (a)

Other income

2017

2016

2015

973

130

945

136

940

134

Total insurance premiums and other income

1,118

1,097

1,090

Expense

Insurance losses and loss adjustment expenses

Acquisition and underwriting expense

Compensation and benefits expense

Insurance commissions expense

Other expenses

Total acquisition and underwriting expense

Total expense

332

415

130

618

950

342

389

141

598

940

293

378

140

586

879

Income from continuing operations before income tax

expense

Total assets

Insurance premiums and service revenue written

Combined ratio (b)

168

7,464

996

157

7,172

948

211

7,053

977

96.8%

98.7%

92.8%

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

(4)

(6)

(7)

(3)

(1)

—

(17)

—

(3)

(1)

(2)

(7)

(26)

(3)

(a)

Includes realized gains on investments of $78 million, $84 million, and $85 million for the years ended December 31, 2017, 2016, and 2015, respectively;
and interest expense of $50 million, $47 million, and $50 million for the years ended December 31, 2017, 2016, and 2015, respectively.

(b) Management uses a combined ratio as a primary measure of underwriting profitability. Underwriting profitability is indicated by a combined ratio under
100% and is calculated as the sum of all incurred losses and expenses (excluding interest and income tax expense) divided by the total of premiums and
service revenues earned and other income.

2017 Compared to 2016

Our Insurance operations earned income from continuing operations before income tax expense of $168 million for the year ended

December 31, 2017, compared to income of $157 million for the year ended December 31, 2016. The increase for the year ended
December 31, 2017, was primarily due to higher vehicle inventory insurance rates, and lower weather-related losses as a result of a one-year
reinsurance agreement entered into in April 2017, partially offset by lower realized investment income.

Insurance premiums and service revenue earned was $973 million for the year ended December 31, 2017, compared to $945 million for

the year ended December 31, 2016. The increase for the year ended December 31, 2017, was primarily due to higher vehicle inventory
insurance rates and growth in our consumer finance protection and insurance products, partially offset by ceding of premiums under a one-
year reinsurance agreement we entered into in April 2017.

Insurance losses and loss adjustment expenses totaled $332 million for the year ended December 31, 2017, compared to $342 million for
2016. The decrease for the year ended December 31, 2017, was primarily due to the ceding of weather-related losses subject to a reinsurance
agreement. The ceding of weather-related losses primarily drove the decrease in the combined ratio to 96.8% for the year ended December 31,
2017, compared to 98.7% for the year ended December 31, 2016.

2016 Compared to 2015

Our Insurance operations earned income from continuing operations before income tax expense of $157 million for the year ended
December 31, 2016, compared to $211 million for the year ended December 31, 2015. The decrease for the year ended December 31, 2016,
was primarily due to higher weather-related losses driven by severe hailstorms.

Insurance premiums and service revenue earned was $945 million for the year ended December 31, 2016, compared to $940 million for

the year ended December 31, 2015. The increase for the year ended December 31, 2016, was primarily due to increased wholesale earned
premium, partially offset by increased dealer reinsurance participation, and lower VSC volume.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Insurance losses and loss adjustment expenses totaled $342 million for the year ended December 31, 2016, compared to $293 million for

2015. The increase was due to higher weather-related losses driven by severe hailstorms. The same higher weather-related losses drove the
increase in the combined ratio to 98.7% for the year ended December 31, 2016, compared to 92.8% for the year ended December 31, 2015.
Higher weather-related losses were partially offset by a decrease in non-weather-related losses driven by lower loss experience for VSC
products.

Premium and Service Revenue Written

The following table summarizes premium and service revenue written by insurance product.

Year ended December 31, ($ in millions)

Vehicle service contracts

New retail

Used retail

Reinsurance (a)

Total vehicle service contracts (b)

Vehicle inventory insurance

Other finance and insurance (c)

Total

2017

2016

2015

453

464

(206)

711

191

444

427

(189)

682

191

996

948

436

485

(178)

743

169

977

(a) Reinsurance represents the transfer of premiums and risk from an Ally insurance company to a third-party insurance company.
(b) VSC revenue is earned over the life of the service contract on a basis proportionate to the anticipated cost pattern.
(c) Other finance and insurance includes GAP coverage, VMCs, ClearGuard, and other ancillary products.

Insurance premiums and service revenue written was $996 million for the year ended December 31, 2017, compared to $948 million for
2016. The increase for the year ended December 31, 2017, was primarily due to higher VSC and GAP volume, and higher vehicle inventory
insurance rates, partially offset by the ceding of vehicle inventory insurance premiums under a one-year reinsurance agreement we entered
into in April 2017 to obtain excess of loss coverage for our vehicle inventory insurance product, which allows us to strategically manage our
level of risk.

Insurance premiums and service revenue written was $948 million for the year ended December 31, 2016, compared to $977 million in
2015. The decrease was primarily due to increased dealer reinsurance participation and lower VSC volume, partially offset by an increase in
wholesale premiums. While increased dealer reinsurance participation may result in lower written premiums being retained by us, this
arrangement helps drive strong relationships with our dealer network.

Cash and Investments

A significant aspect of our Insurance operations is the investment of proceeds from premiums and other revenue sources. We use these

investments to satisfy our obligations related to future claims at the time these claims are settled. Our Insurance operations have an
Investment Committee, which develops guidelines and strategies for these investments. The guidelines established by this committee reflect
our risk appetite, liquidity requirements, regulatory requirements, and rating agency considerations, among other factors.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table summarizes the composition of our Insurance operations cash and investment portfolio at fair value.

December 31, ($ in millions)

Cash

Noninterest-bearing cash

Interest-bearing cash

Total cash

Available-for-sale securities

Debt securities

U.S. Treasury

U.S. States and political subdivisions

Foreign government

Agency mortgage-backed residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

Total debt securities

Equity securities

Total available-for-sale securities

Total cash and securities

2017

2016

298

983

1,281

380

773

154

613

174

—

1,256

3,372

518

3,890

5,171

273

612

885

299

744

162

633

227

1,443

3,553

595

4,148

5,033

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Mortgage Finance
Results of Operations

The following table summarizes the activities of our Mortgage Finance operations. The amounts presented are before the elimination of

balances and transactions with our reportable segments.

Year ended December 31, ($ in millions)

2017

2016

2015

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

Net financing revenue and other interest income

Total financing revenue and other interest income

Interest expense

Net financing revenue and other interest income

Gain on mortgage loans, net

Other income, net of losses

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Other operating expenses

Total noninterest expense

Income from continuing operations before income tax

expense

Total assets

n/m = not meaningful

2017 Compared to 2016

308

176

132

136

108

11,708

250

153

177

120

—

(4)

8,307

—

6,461

(15)

n/m

(77)

(57)

(61)

(41)

(28)

—

157

(160)

(59)

(72)

n/m

Our Mortgage Finance operations earned income from continuing operations before income tax expense of $20 million and $34 million
for the years ended December 31, 2017, and 2016, respectively. The decrease for the year ended December 31, 2017, was primarily due to an
increase in noninterest expense driven by continued build out of the direct-to-consumer offering and asset growth as well as higher provision
for loan losses. This decrease was partially offset by an increase in net financing revenue and other interest income driven by increased
portfolio loan balances as a result of bulk purchases of high-quality jumbo and LMI mortgage loans and direct-to-consumer originations.

Net financing revenue and other interest income was $132 million and $97 million for the years ended December 31, 2017, and 2016,

respectively. The increase in net financing revenue and other interest income was primarily due to increased loan balances as a result of bulk
purchases of high-quality jumbo and LMI mortgage loans. During the year ended December 31, 2017, we purchased $4.5 billion of mortgage
loans that were originated by third parties, compared to $3.7 billion during the year ended December 31, 2016.

Gain on sale of mortgage loans increased $3 million for the year ended December 31, 2017, compared to 2016, as a result of direct-to-

consumer mortgage originations and the subsequent sale of these loans to our fulfillment partner.

The provision for loan losses increased $12 million for the year ended December 31, 2017, compared to 2016. The increase for the year

ended December 31, 2017, was primarily due to lower loss reserve requirements in 2016, which resulted from the seasoning of the loan
portfolio and the alignment of reserves to favorable loss experience. Provision expense also increased as a result of estimated impacts of
hurricane activity which occurred during the third quarter of 2017 as well as growth in the loan portfolio. The portfolio continues to
demonstrate strong credit performance consistent with expectations.

Total noninterest expense was $108 million for the year ended December 31, 2017, compared to $67 million for the year ended

December 31, 2016. The increase was driven by continued expansion of the direct-to-consumer offering and asset growth.

2016 Compared to 2015

Our Mortgage Finance operations earned income from continuing operations before income tax expense of $34 million for the year
ended December 31, 2016, compared to $11 million for the year ended December 31, 2015. The increase was primarily due to an increase in
net financing revenue and other interest income driven by increased loan balances as a result of bulk purchases of high-quality jumbo and
LMI mortgage loans, offset by an increase in interest expense due to higher funding costs for the larger loan portfolio. In addition, the
provision for loan losses was favorable due to lower reserve requirements as the portfolio seasoned and reserves were aligned to more
favorable loss experience. The increase in income from continuing operations before income tax expense was partially offset by higher
noninterest expense to support our bulk acquisition strategy and the launch of direct mortgage originations.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Net financing revenue and other interest income was $97 million for the year ended December 31, 2016, compared to $57 million for the
year ended December 31, 2015. The increase in net financing revenue and other interest income was primarily due to increased loan balances
as a result of bulk purchases of high-quality jumbo and LMI mortgage loans. During the year ended December 31, 2016, we purchased $3.7
billion of mortgage loans that were originated by third parties compared to purchases of $4.1 billion in 2015. The increase in net financing
revenue and other interest income was partially offset by an increase in interest expense as a result of higher funding costs also driven by the
larger loan portfolio.

The provision for loan losses decreased $11 million for the year ended December 31, 2016, compared to 2015. The decrease was

primarily due to lower reserve requirements as the portfolio seasoned and reserves were aligned to more favorable loss experience.

Total noninterest expense was $67 million for the year ended December 31, 2016, compared to $39 million for the year ended December

31, 2015. The increase was primarily due to higher noninterest expense to support our bulk acquisition strategy and the launch of direct
mortgage originations.

The following table presents the net unpaid principal balance (UPB), net UPB as a percentage of total, weighted-average coupon (WAC),

premium net of discounts, loan-to-value (LTV), and FICO® Scores for the products in our Mortgage Finance held-for-investment loan
portfolio.

Product

December 31, 2017

Adjustable-rate

Fixed-rate

Total

December 31, 2016

Adjustable-rate

Fixed-rate

Total

Net UPB (a)
($ in millions)

% of total net
UPB

WAC

Net premium
($ in millions)

Average
refreshed
LTV (b)

Average
refreshed
FICO® (c)

2,579

8,824

11,403

2,488

5,633

8,121

100

3.35% $

4.02

3.87

3.34 % $

4.02

3.81

212

254

131

173

56.82%

62.02

60.84

57.94 %

60.47

59.69

774

771

772

773

772

(a) Represents UPB net of charge-offs.
(b) Updated home values were derived using a combination of appraisals, broker price opinions, automated valuation models, and metropolitan statistical area

level house price indices.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Corporate Finance
Results of Operations

The following table summarizes the activities of our Corporate Finance operations. The amounts presented are before the elimination of

balances and transactions with our reportable segments.

Year ended December 31, ($ in millions)

2017

2016

2015

Net financing revenue and other interest income

Interest and fees on finance receivables and loans

256

192

143

Interest expense

Net financing revenue and other interest income

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Other operating expenses

Total noninterest expense

167

212

Income from continuing operations before income tax

expense

Total assets

2017 Compared to 2016

114

3,979

121

147

114

3,183

2,677

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

(25)

(120)

(24)

(4)

(15)

(31)

(11)

(19)

(22)

(20)

Our Corporate Finance operations earned income from continuing operations before income tax expense of $114 million for the year

ended December 31, 2017, compared to $71 million for the year ended December 31, 2016. The increase was driven by our strategy to
responsibly grow our lending portfolio and extend our product suite while selectively pursuing opportunities to broaden industry and product
diversification. Results were also favorably impacted by a gain on an equity investment in the first quarter of 2017, the full collection of funds
related to a nonaccrual loan in the second quarter of 2017, and higher loan syndication income.

Net financing revenue and other interest income was $167 million for the year ended December 31, 2017, compared to $121 million for

the year ended December 31, 2016. The increase was primarily due to the growth of our lending portfolio driven by higher new loan
originations, which resulted in a 23% increase in the gross carrying value of finance receivables and loans as of December 31, 2017,
compared to December 31, 2016. Additionally, interest and fees on finance receivables and loans for the year ended December 31, 2017, was
favorably impacted by the payoff of a nonaccrual loan exposure in the second quarter of 2017, which resulted in the recognition of $9 million
of interest income.

Other revenue was $45 million for the year ended December 31, 2017, compared to $26 million for the year ended December 31, 2016.
The increase was primarily driven by an $11 million gain on the sale of an equity investment during the first quarter of 2017, and higher loan
syndication income.

The provision for loan losses increased $12 million for the year ended December 31, 2017, compared to 2016. This increase was
primarily due to higher provision expense for individually impaired loans, and increased reserves due primarily to continued asset growth.
The provision also increased as a result of lower recoveries of previously charged-off loans, compared to 2016.

Total noninterest expense was $76 million for the year ended December 31, 2017, compared to $66 million for the year ended
December 31, 2016. The increase was primarily due to an increase in compensation and benefits expense to support the growth of the
business.

2016 Compared to 2015

Our Corporate Finance operations earned income from continuing operations before income tax expense of $71 million for the year
ended December 31, 2016, compared to $50 million for the year ended December 31, 2015. The increase was a result of higher net financing
revenue and other interest income due primarily to asset growth. The increase was partially offset by higher compensation and benefits and
other operating expenses to support the growth of the business.

Net financing revenue and other interest income was $121 million for the year ended December 31, 2016, compared to $89 million for

the year ended December 31, 2015. The increase was primarily due to asset growth across all business segments in line with our growth
strategy, which resulted in a 24% increase in the gross carrying value of finance receivables and loans as of December 31, 2016, compared to
December 31, 2015.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Other revenue was $26 million for the year ended December 31, 2016, compared to $25 million for the year ended December 31, 2015.

The increase was due to higher equity investment income, partially offset by lower loan syndication income.

The provision for loan losses increased $1 million for the year ended December 31, 2016, compared to 2015. The increase was primarily

due to lower recoveries on nonaccrual loan exposures in 2016, compared to 2015.

Total noninterest expense was $66 million for the year ended December 31, 2016, compared to $55 million for the year ended

December 31, 2015. The increase was primarily due to higher expenses to support the growth of the business.

Credit Portfolio

The following table presents loans held-for-sale, the gross carrying value of finance receivables and loans outstanding, and unfunded

commitments to lend of our Corporate Finance operations.

December 31, ($ in millions)

Loans held-for-sale, net

Finance receivables and loans

Unfunded lending commitments (a)

2017

2016

3,910

1,813

—

3,180

1,483

(a)

Includes unused revolving credit line commitments for loans held-for-sale and finance receivables and loans, signed commitment letters, and standby
letter of credit facilities, which are issued on behalf of clients and may contingently require us to make payments to a third-party beneficiary should the
client fail to fulfill a contractual commitment. As many of these commitments are subject to borrowing base agreements and other restrictive covenants or
may expire without being fully drawn, the contract amounts are not necessarily indicative of future cash requirements.

The following table presents the percentage of total finance receivables and loans of our Corporate Finance operations by industry

concentration. The finance receivables and loans are reported at gross carrying value.

December 31,

Industry

Services

Health services

Automotive and transportation

Wholesale

Machinery, equipment, and electronics

Other manufactured products

Chemicals and metals

Food and beverages

Paper, printing, and publishing

Retail trade

Other

Total finance receivables and loans

2017

2016

31.0%

27.4%

15.6

10.3

8.7

7.9

7.1

5.0

4.1

3.0

2.6

4.7

12.0

13.5

8.9

6.6

8.8

5.8

4.2

3.2

5.1

4.5

100.0%

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Corporate and Other

The following table summarizes the activities of Corporate and Other, which primarily consist of centralized corporate treasury activities
such as 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 our corporate FTP and treasury ALM activities.
Corporate and Other also includes certain equity investments, which primarily consist of FHLB and FRB stock, the management of our
legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, the activity related to Ally Invest, and
reclassifications and eliminations between the reportable operating segments.

Year ended December 31, ($ in millions)

2017

2016

2015

Favorable/
(unfavorable)
2017–2016
% change

Favorable/
(unfavorable)
2016–2015
% change

Net financing revenue and other interest income

Interest and fees on finance receivables and loans (a)

Interest on loans held-for-sale

Interest and dividends on investment securities and other

earning assets

Interest on cash and cash equivalents

Other, net

Total financing revenue and other interest income

Interest expense

Original issue discount amortization (b)

Other interest expense (c)

Total interest expense

Net financing revenue and other interest income

Other revenue

(Loss) gain on mortgage and automotive loans, net

Loss on extinguishment of debt

Other gain on investments, net

Other income, net of losses

Total other revenue (expense)

Total net revenue

Provision for loan losses

Total noninterest expense (d)

—

497

(7)

588

348

438

150

(11)

(7)

231

(16)

262

319

(12)

378

337

415

(37)

(6)

(5)

101

162

125

(13)

199

282

—

(8)

361

212

274

(357)

(151)

(64)

(5)

155

Loss from continuing operations before income tax

expense

Total assets

(15) $

(61) $

(214)

29,908

28,719

26,754

n/m

(15)

(3)

(6)

n/m

(83)

(40)

(76)

(50)

(32)

(20)

(100)

n/m

(50)

(26)

(59)

(51)

(143)

(109)

n/m

160

(28)

n/m = not meaningful
(a) Primarily related to financing revenue from our legacy mortgage portfolio and impacts related to hedging activities associated with our consumer

automotive loan portfolio.

(b) Amortization is included as interest on long-term debt in the Consolidated Statement of Comprehensive Income.
(c)
(d)

Includes the residual impacts of our FTP methodology and impacts of hedging activities of certain debt obligations.
Includes reductions of $804 million, $770 million, and $755 million for the years ended December 31, 2017, 2016, 2015, respectively, related to the
allocation of corporate overhead expenses to other segments. The receiving segments record their allocation of corporate overhead expense within other
operating expense.

The following table presents the scheduled remaining amortization of the original issue discount at December 31, 2017.

Year ended December 31, ($ in millions)

2018

2019

2020

2021

2022

2023 and
thereafter (a)

Total

Original issue discount

Outstanding balance at year end

1,135

1,096

1,057

1,014

967

—

Total amortization (b)

100

967

1,235

(a) The maximum annual scheduled amortization for any individual year is $153 million in 2030.
(b) The amortization is included as interest on long-term debt on the Consolidated Statement of Income.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

2017 Compared to 2016

Corporate and Other incurred a loss from continuing operations before income tax expense of $15 million for the year ended
December 31, 2017, compared to a loss of $61 million for the year ended December 31, 2016. The decrease in loss for the year ended
December 31, 2017, was primarily due to an increase in financing revenue and other interest income driven by an increase in interest and
dividends on investment securities and other earning assets. The decrease in loss was partially offset by a decrease in gains on sales of
investment securities, an increase in noninterest expense, including compensation and benefits, to support the growth of the business, and an
increase in interest expense driven by increased interest on deposits resulting from deposit growth and increased LIBOR rates on secured
borrowings.

Financing revenue and other interest income was $588 million for the year ended December 31, 2017, compared to $378 million for the

year ended December 31, 2016. The increase was primarily driven by increased interest and dividends from investment securities and other
earning assets compared to 2016, primarily as a result of growth in the size of the investment portfolio. Results for the year ended
December 31, 2017, were also favorably impacted by increases in interest on cash and cash equivalents, as a result of higher yields.

Total interest expense was $438 million for the year ended December 31, 2017, compared to $415 million for the year ended
December 31, 2016. Total interest expense increased during the year ended December 31, 2017, compared to 2016, driven primarily by
increased interest on deposits resulting from deposit growth and increased LIBOR rates on secured borrowings. The increase was partially
offset by a decrease in higher-cost unsecured debt borrowings as maturities are replaced with lower cost funding.

Other gain on investments was $24 million for the year ended December 31, 2017, compared to $101 million for the year ended

December 31, 2016. The decrease was due primarily to higher levels of sales of investment securities in 2016 that did not recur in 2017.

The provision for loan losses decreased $3 million for the year ended December 31, 2017, compared to the same period in 2016, as a

result of lower net charge-offs as the legacy mortgage portfolio continues to run-off and loss trends remain favorable, partially offset by the
impacts of hurricane activity during the year.

Noninterest expense was $262 million for the year ended December 31, 2017, compared to $199 million for the year ended

December 31, 2016. The increases were primarily due to increased expenses from the Ally Invest integration and operations included in our
results subsequent to acquisition in the second quarter of 2016 and increased expenses to support the growth of the business.

Total assets were $29.9 billion as of December 31, 2017, compared to $28.7 billion as of December 31, 2016. The increase was primarily
the result of growth in our available-for-sale and held-to-maturity securities portfolios. The increase was partially offset by a reduction of cash
and cash equivalents, other assets, and the continued runoff of our legacy mortgage portfolio. At December 31, 2017, the gross carrying value
of the legacy mortgage portfolio was $2.1 billion, compared to $2.8 billion at December 31, 2016.

2016 Compared to 2015

Loss from continuing operations before income tax expense for Corporate and Other was $61 million for the year ended December 31,

2016, compared to a loss of $214 million for the year ended December 31, 2015. The decrease in loss for the year ended December 31, 2016,
was primarily due to a decrease in loss on extinguishment of debt due to debt tender offers in 2015, an increase in gain on investments related
to increased sales of debt securities, and a decrease in the provision for loan losses as a result of lower net charge-offs due to runoff of the
legacy mortgage portfolio. The decrease in loss was partially offset by an increase in interest expense driven by increased LIBOR rates, an
increase in interest on deposits resulting from deposit growth, and nonrecurring favorable debt hedging activity in 2015, partially offset by
favorable refinancing activity related to unsecured debt and a decrease in secured debt volume. Additionally, the decrease in loss was offset by
a decrease in gain on mortgage loans due to nonrecurring sales of legacy TDR mortgage loans in 2015 and an increase in noninterest expense
due primarily to the Ally Invest integration and operations and higher FDIC deposit fees.

Interest expense was $415 million for the year ended December 31, 2016, compared to $274 million for the year ended December 31,

2015. The increase was primarily driven by increased LIBOR rates, an increase in interest on deposits resulting from deposit growth, and
nonrecurring favorable debt hedging activity in 2015. The increase was partially offset by favorable refinancing activity related to unsecured
debt and a decrease in secured debt volume.

Net loss on mortgage loans was $6 million for the year ended December 31, 2016, compared to a net gain of $68 million for the year

ended December 31, 2015. The change was primarily due to nonrecurring sales of legacy TDR mortgage loans in 2015.

Loss on extinguishment of debt was $5 million for the year ended December 31, 2016, compared to $357 million for the year ended

December 31, 2015. The decrease in loss was due to nonrecurring debt tender offers in 2015.

Other gain on investments was $101 million for the year ended December 31, 2016, compared to $70 million for the year ended

December 31, 2015. The increase was due primarily to an increase in sales of securities compared to 2015.

The provision for loan losses decreased $8 million for the year ended December 31, 2016, compared to 2015, as a result of lower net

charge-offs as the legacy mortgage portfolio continues to run-off. The decrease was partially offset by nonrecurring reserve releases in 2015.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Noninterest expense was $199 million for the year ended December 31, 2016, compared to $155 million for the year ended

December 31, 2015. The increase was primarily due to increased expenses from the Ally Invest integration and operations and higher FDIC
deposit fees.

Total assets were $28.7 billion as of December 31, 2016, compared to $26.8 billion as of December 31, 2015. The increase was primarily

the result of growth of our available-for-sale and held-to-maturity securities portfolios as well as the June 1, 2016 acquisition of TradeKing.
At December 31, 2016, the total assets of TradeKing, which was rebranded as Ally Invest, were $299 million. The increase was partially
offset by the continued runoff of our legacy mortgage portfolio. At December 31, 2016, the gross carrying value of the legacy mortgage
portfolio was $2.8 billion, compared to $3.4 billion at December 31, 2015.

Cash and Securities

The following table summarizes the composition of the cash and securities portfolio at fair value for Corporate and Other.

December 31, ($ in millions)

Cash

Noninterest-bearing cash

Interest-bearing cash

Total cash

Available-for-sale securities

Debt securities

U.S. Treasury

U.S. States and political subdivisions

Agency mortgage-backed residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Total available-for-sale securities

Held-to-maturity securities

Debt securities

Agency mortgage-backed residential

Asset-backed retained notes

Total held-to-maturity securities

Total cash and securities

Ally Invest

2017

2016

523

2,425

2,948

1,397

13,678

2,320

519

936

1,249

3,770

5,019

1,321

9,657

1,870

498

1,394

18,931

14,778

1,829

1,865

789

—

789

23,744

20,586

On June 1, 2016, we acquired 100% of the equity of TradeKing, a digital wealth management company with an online broker-dealer,
digital portfolio management platform, and educational content. In May 2017, we launched Ally Invest, our digital brokerage and wealth
management offering that combines the platform we acquired from the acquisition of TradeKing with our award-winning online banking
platform. The following table presents the trading days and average customer trades per day during each respective quarter and the number of
funded accounts, total net customer assets, and total customer cash balances as of the end of each full quarter since acquisition for our online
broker-dealer. Average customer trades per day declined during the second and third quarters of 2017 due primarily to lower market volatility
and seasonality, followed by a moderate 8% increase observed in the fourth quarter. Additionally, funded accounts have increased since our
acquisition of TradeKing as a result of a continued focus on marketing campaigns, while net customer assets have increased due to market
appreciation and growth in funded accounts.

4th Quarter
2017

3rd Quarter
2017

2nd Quarter
2017

1st Quarter
2017

4th Quarter
2016

3rd Quarter
2016

Trading days (a)

Average customer trades per day (in thousands)

Funded accounts (b) (in thousands)

Total net customer assets ($ in millions)

Total customer cash balances ($ in millions)

62.5

16.8

261

62.5

15.5

255

63.0

16.5

250

62.0

19.1

251

62.5

17.5

244

5,355 $

1,144 $

5,204 $

1,168 $

5,007 $

1,154 $

4,987 $

1,232 $

4,771 $

1,253 $

64.0

17.1

240

4,678

1,177

(a) Represents the number of days the New York Stock Exchange and other U.S. stock exchange markets are open for trading. A half day represents a day

when the U.S. markets close early.

(b) Represents open and funded brokerage accounts.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Risk Management

Managing the risk/reward trade-off is a fundamental component of operating our businesses, and all employees are responsible for

managing risk. We have multiple layers of defense to ensure that risks are effectively identified, monitored, and managed.

•

Lines of Business — Responsible for managing all of the risks that emanate from their risk-taking activities.

Risk Management — Responsible for establishing and maintaining our risk management program and promulgating it enterprise-
wide. Risk management also provides an independent review and challenge to the Lines of Business adherence to our risk
management program.

•

Internal Audit/Loan Review — Provides its own independent assessments over our internal controls and governance.

Our risk management program is overseen by the Ally Board of Directors (the Board), various risk committees, the executive leadership
team, and our associates. The Risk Committee of the Board (RC), together with the Board, sets the risk appetite across our company while the
risk committees, executive leadership team, and our associates identify and monitor current and emerging risks and ensure those risks are
managed to be within our risk appetite. Ally’s primary types of risk include credit, lease residual, market, operational, insurance/underwriting,
business/strategic, reputation, and liquidity.

•

Credit risk — The risk of loss arising from an obligor not meeting its contractual obligations to Ally.

Lease Residual risk — The risk of loss arising from the possibility that the actual proceeds realized upon the sale of returned
vehicles will be lower than the projection of the values used in establishing the pricing at lease inception.

• Market risk — The risk of loss arising from changes in the fair value of our assets or liabilities (including derivatives) caused by

movements in market variables, such as interest rates, foreign-exchange rates, and equity and commodity prices.

• Operational risk — The risk of loss or harm arising from inadequate or failed processes or systems, human factors, or external

events.

•

Insurance/Underwriting risk — The risk of loss associated with insured events occurring, the severity of insured events, and the
timing of claim payments arising from insured events.

Business/Strategic risk — The risk resulting from the pursuit of business plans that turn out to be unsuccessful because of, for
example, uninformed business decisions, inadequate resource allocation, or failure to respond well to changes in the business and
competitive environment.

Reputation risk — The risk to earnings or capital arising from negative public opinion.

Liquidity risk — The risk that our financial condition or overall safety and soundness is adversely affected by an inability, or
perceived inability, to meet our financial obligations, and to withstand unforeseen liquidity stress events (refer to discussion in the
section titled Liquidity Management, Funding, and Regulatory Capital within this MD&A).

While risk oversight is ultimately the responsibility of the Board, our governance structure starts within each line of business, including
committees established to oversee risk in their respective areas. The lines of business are responsible for executing on risk strategies, policies,
and controls that are fundamentally sound and compliant with enterprise risk management policies and with applicable laws and regulations.
The line of business risk committees, which report up to the RC, ensure and monitor the performance within each portfolio and determine
whether to amend any risk practices based upon portfolio trends.

The Enterprise Risk Management and Compliance organizations are accountable for independently identifying, monitoring, measuring,

and reporting on our various risks, and they are responsible for designing an effective risk management framework and structure. They are
also responsible for ensuring and monitoring that our risks remain within our risk appetite established by the Board, developing and
maintaining policies, and implementing risk management strategies and processes to mitigate risk. In addition, the Enterprise Risk
Management Committee (ERMC) established by the Chief Risk Officer is responsible for oversight of senior management’s responsibility to
manage Ally’s risk profile within our risk appetite set by the RC and for implementing Ally’s risk and compliance programs. The Chief Risk
Officer reports to the chair of the RC, as well as the Chief Executive Officer.

All lines of business and enterprise functions are subject to full and unrestricted audits by Audit Services. Audit Services reports to the

Audit Committee of the Board, and is primarily responsible for assisting the Audit Committee in fulfilling its governance and oversight
responsibilities. Audit Services is granted free and unrestricted access to any and all of our records, physical properties, technologies,
management, and employees.

In addition, our Loan Review Group provides an independent assessment of the quality of our credit risk portfolios and credit risk
management practices, and all lines of business and corporate functions that create or influence credit risk are subject to full and unrestricted
reviews by the Loan Review Group. This group also is granted free and unrestricted access to any and all of our records, physical properties,
technologies, management, and employees and reports its findings directly to the RC and the Ally General Auditor. The findings of this group
help to strengthen our risk management practices and processes throughout the organization.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Loan and Lease Exposure

The following table summarizes the exposures from our loan and lease activities.

December 31, ($ in millions)

Finance receivables and loans

Automotive Finance

Mortgage Finance

Corporate Finance

Corporate and Other (a)

Total finance receivables and loans

Loans held-for-sale

Mortgage Finance (b)

Corporate Finance

Corporate and Other

Total loans held-for-sale

Total on-balance sheet loans

Off-balance sheet securitized loans

Automotive Finance (c)

Whole-loan sales

Automotive Finance (c)

Total off-balance sheet loans

Operating lease assets

Automotive Finance

Total loan and lease exposure

Serviced loans and leases

Automotive Finance

Mortgage Finance

Corporate Finance

Corporate and Other

Total serviced loans and leases

2017

2016

105,129

104,646

11,657

3,910

2,197

8,294

3,180

2,824

122,893

118,944

108

—

123,001

118,944

1,964

2,392

1,399

3,363

8,741

135,105

116,878

11,670

3,893

2,093

3,164

5,556

11,470

135,970

121,480

8,294

2,991

2,757

134,534

135,522

(a)

Includes $2.1 billion and $2.8 billion of consumer mortgage loans in our legacy mortgage portfolio at December 31, 2017, and December 31, 2016,
respectively.

(b) Represents the current balance of conforming mortgages originated directly to the held-for-sale portfolio.
(c) Represents the current unpaid principal balance of outstanding loans based on our customary representation and warranty provisions.

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. Our lease residual risk, which may be more volatile than credit risk in stressed macroeconomic
scenarios, has declined with the decrease in the lease portfolio.

•

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 borrowing. Finance receivables and loans are reported
at their gross carrying value, which includes the principal amount outstanding, net of unamortized deferred fees and costs on
originated loans, unamortized premiums and discounts on purchased loans, unamortized basis adjustments arising from the
designation of finance receivables and loans as the hedged item in qualifying fair value hedge relationships, and cumulative
principal charge-offs. We refer to the gross carrying value less the allowance for loan loss as the net carrying value in finance
receivables and loans. 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 may elect 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 are reflected
in current period earnings. We use market-based instruments, such as derivatives, to hedge changes in the fair value of these loans.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

•

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 their net carrying value or fair market 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. Our

exposure is primarily limited to customary representation and warranty provisions. Similar to finance receivables and loans, we
manage the economic risks of these exposures through activities including servicing and collections.

• Whole-loan sales — Loans that we transfer off-balance sheet to third-party investors. Our exposure is primarily limited to

customary representation and warranty provisions. Similar to finance receivables and loans, we manage the economic risks of these
exposures 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 and is reported net of accumulated depreciation. 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
pricing based on the projected residual value of the lease vehicle. This evaluation is primarily based on a proprietary model, which
includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle,
automotive manufacturer incentives, and shifts in used vehicle supply. This internally-generated data is compared against third-
party, independent data for reasonableness. Periodically, we revise the projected value of the lease vehicle at termination based on
current market conditions and adjust depreciation expense appropriately over the remaining life of the contract. At termination, our
actual sales proceeds from remarketing the vehicle may be higher or lower than the estimated residual value resulting in a gain or
loss on remarketing recorded through depreciation expense. The balance sheet reflects both the lease asset as well as any associated
rent receivables. The lease rent receivable is accrued when collection is reasonably assured and presented as a component of other
assets. The lease asset is reviewed for impairment in accordance with applicable accounting standards.

•

Serviced loans and leases — Loans that we service on behalf of our customers or another financial institution. As such, these loans
can be on- or off-balance sheet. For our serviced consumer automotive loans, we do not recognize servicing assets or liabilities
because we receive a fee that adequately compensates us for the servicing costs.

Refer to the section titled Critical Accounting Estimates within this MD&A and Note 1 to the Consolidated Financial

Statements for further information.

Since the end of 2014, we have experienced growth in our consumer retail automotive loan portfolio and a significant reduction in lease

assets. This shift in our portfolio mix has contributed to an increase in provision expense for loan losses. Consumer lease residuals are not
included in the allowance for loan losses as changes in the expected residual values on consumer leases are included in depreciation expense
over the remaining life of the lease. Our risk to future fluctuations in used vehicle values has diminished in recent years as our lease assets
have declined materially. While all leases are exposed to potential reductions in used vehicle values, only loans where we take possession of
the vehicle are affected by potential reductions in used vehicle values. Operating lease assets, net of accumulated depreciation, decreased $2.7
billion to $8.7 billion at December 31, 2017, from $11.5 billion at December 31, 2016.

Credit Risk Management

Credit risk is defined as the risk of loss arising from an obligor not meeting its contractual obligations to Ally. Therefore, credit risk is a

major source of potential economic loss to Ally. Credit risk is monitored by the risk committees, executive leadership team, and our
associates. Together, they oversee credit decisioning, account servicing activities, and credit risk management processes, and monitor credit
risk exposures to ensure they are managed in a safe and sound manner and are within our risk appetite. In addition, our Loan Review Group
provides an independent assessment of the quality of our credit portfolios and credit risk management practices, and directly reports its
findings to the RC and the Ally General Auditor on a regular basis.

To mitigate risk, we have implemented specific policies and practices across all lines of business, utilizing both qualitative and

quantitative analyses. This reflects our commitment to maintain an independent and ongoing assessment of credit risk and credit quality. Our
policies require an objective and timely assessment of the overall quality of the consumer and commercial loan and lease portfolios. This
includes the identification of relevant trends that affect the collectability of the portfolios, segments of the portfolios that are potential problem
areas, loans and leases with potential credit weaknesses, and the assessment of the adequacy of internal credit risk policies and procedures to
ensure and monitor compliance with relevant laws and regulations. Our consumer and commercial loan and lease portfolios are subject to
regular stress tests that are based on plausible, but unexpected, economic scenarios to ensure that we can withstand a severe economic
downturn. In addition, we establish and maintain underwriting policies and guardrails across our portfolios and higher risk segments (e.g.,
nonprime) based on our risk appetite.

Another important aspect to managing credit risk involves the need to carefully monitor and manage the performance and pricing of our

loan products to ensure that we generate appropriate risk-adjusted returns and are adequately compensated for the risk we are taking. When
considering pricing, various granular risk-based factors are considered such as expected loss rates, loss volatility, anticipated operating costs,
and targeted returns on equity. We carefully monitor credit losses and trends in credit losses in conjunction with pricing at contract inception.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

As a result of our strategy to achieve higher risk-adjusted returns by originating consumer automotive assets across a broader credit spectrum,
we incurred higher provision expense and net charge-offs. We continue to closely monitor our loan performance and profitability performance
in light of forecasted economic conditions, and manage credit risk and expectations of losses in the portfolio.

We manage credit risk based on the risk profile of the borrower, the source of repayment, the underlying collateral, and current market

conditions. We monitor the credit risk profile of individual borrowers and the aggregate portfolio of borrowers either within a designated
geographic region or a particular product or industry segment. We perform quarterly analyses of the consumer automotive, consumer
mortgage, and commercial portfolios using a range of indicators to assess the adequacy of the allowance for loan losses based on historical
and current trends. Refer to Note 9 to the Consolidated Financial Statements for additional information.

Additionally, we utilize numerous collection strategies to mitigate loss and provide ongoing support to customers in financial distress.
For automotive loans, we work with customers when they become delinquent on their monthly payment. In lieu of repossessing their vehicle,
we may offer several types of assistance to aid our customers based on their willingness and ability to repay their loan. Loss mitigation may
include extension of the loan maturity date and rewriting the loan terms. For mortgage loans, as part of certain programs, we offer mortgage
loan modifications to qualified borrowers. These programs are in place to provide support to our mortgage customers in financial distress,
including principal forgiveness, maturity extensions, delinquent interest capitalization, and changes to contractual interest rates.

Due to the high level of hurricane activity in the third quarter of 2017, we identified over half a million consumer automotive loan
customers that resided in areas that may have been affected by hurricane activity. Within our loan and lease portfolios, hurricane activity most
notably impacted our automotive finance borrowers in the states of Texas and Florida during the year ended December 31, 2017. In response
to these events, we placed a temporary moratorium on collection activities, including repossession, and have offered flexibility to borrowers
through granting payment extensions that have generally ranged from 30 to 90 days. We continue to actively work with borrowers to assess
and manage individual circumstances and to monitor and manage credit risk. We have also offered temporary assistance programs to impacted
borrowers in our mortgage lending portfolio including special forbearances and a moratorium on certain fees and default activities.
Additionally, in partnership with our dealer network, we took actions to ensure that vehicle inventory was moved to safer locations, which
reduced exposure to loss from weather-related events. As a result of the hurricane activity, which most notably impacted our retail automotive
loan portfolio, we increased the allowance for loan losses by $53 million during the third quarter of 2017. We continue to maintain a reserve
of $45 million as of December 31, 2017, and expect to incur losses against this reserve throughout 2018.

Furthermore, we manage our counterparty credit exposure based on the risk profile of the counterparty. Within our policies we have
established standards and requirements for managing counterparty risk exposures in a safe and sound manner. Counterparty credit risk is
derived from multiple exposure types, including derivatives, securities trading, securities financing transactions, financial futures, cash
balances (e.g., due from depository institutions, restricted accounts, and cash equivalents), and investment in debt securities. For more
information on derivative counterparty credit risk, refer to Note 22 to the Consolidated Financial Statements.

We closely monitor macroeconomic trends given the nature of our business and the potential impacts on our exposure to credit risk.
During 2017, the U.S. economy continued to modestly expand and consumer confidence remained strong. The labor market remained healthy
during the year, with the unemployment rate falling to 4.1% as of December 31, 2017. Within the U.S. automotive market, new light vehicle
sales have moderated from historic highs, and were down modestly year over year at a Seasonally Adjusted Annual Rate of 17.2 million for
the year ended December 31, 2017. We continue to experience modest downward pressure on used vehicle values and expect that to continue
throughout 2018.

On-balance Sheet Portfolio

Our on-balance sheet portfolio includes both finance receivables and loans, and loans held-for-sale. At December 31, 2017, this primarily

included $105.1 billion of automotive finance receivables and loans and $13.8 billion of consumer mortgage finance receivables and loans.
Our Mortgage Finance operations consist of the management of our held-for-investment and held-for-sale mortgage loan portfolios. We
acquire mortgage loans through two primary channels including bulk purchases of high-quality jumbo and LMI mortgage loans originated by
third parties, as well as direct-to-consumer mortgage offerings through Ally Home. Under our current arrangement, our direct-to-consumer
conforming mortgages are originated as held-for-sale and sold, while jumbo mortgages are originated as held-for-investment.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table presents our total on-balance sheet consumer and commercial finance receivables and loans.

December 31, ($ in millions)

2017

2016

2017

2016

2017

2016

Outstanding

Nonperforming (a)

Accruing past due 90
days or more

Consumer

Finance receivables and loans

Loans at gross carrying value

81,821

76,843

720

697

— $

Loans held-for-sale

Total consumer loans (b)

Commercial

Finance receivables and loans

Loans at gross carrying value

Loans held-for-sale

Total commercial loans

—

81,834

76,843

41,072

42,101

—

41,167

42,101

—

720

—

Total on-balance sheet loans

123,001

118,944

792

—

697

122

—

122

819

—

— $

—

(a)
(b)

Includes nonaccrual TDR loans of $270 million and $286 million at December 31, 2017, and December 31, 2016, respectively.
Includes outstanding CSG loans of $7.3 billion and $6.7 billion at December 31, 2017, and December 31, 2016, respectively, and RV loans of $1.8 billion
and $1.7 billion at December 31, 2017, and December 31, 2016, respectively.

Total on-balance sheet loans outstanding at December 31, 2017, increased $4.1 billion to $123.0 billion from December 31, 2016,
reflecting an increase of $5.0 billion in the consumer portfolio and a decrease of $934 million in the commercial portfolio. The increase in
consumer on-balance sheet loans was primarily due to portfolio growth within the Mortgage Finance portfolio as a result of the execution of
bulk loan purchases, and our consumer automotive loan originations which outpaced portfolio runoff. The decrease in commercial on-balance
sheet loans outstanding was primarily due to a reduction in the number of dealer relationships due to the competitive environment across the
automotive lending market, as well as lower dealer inventory levels year over year.

Total TDRs outstanding at December 31, 2017, increased $49 million to $712 million from December 31, 2016. The increase was

primarily driven by our retail automotive loan portfolio which experienced overall portfolio growth during the year, was impacted by the
hurricane activity that occurred during the third quarter of 2017, and reflects our strategy to originate loans across a full credit spectrum.
These increases were partially offset by sales of certain previously written-down retail automotive loans related to consumers in Chapter 13
bankruptcy. Refer to Note 9 to the Consolidated Financial Statements for additional information.

Total nonperforming loans at December 31, 2017, decreased $27 million to $792 million from December 31, 2016, reflecting a decrease

of $50 million of commercial nonperforming loans and an increase of $23 million of consumer nonperforming loans. The decrease in total
commercial nonperforming loans was primarily due to reductions within our Corporate Finance portfolio as a result of the payoff of one loan
and the recognition of a partial charge-off on a loan that was restructured during the year. The increase in total consumer nonperforming loans
was primarily driven by the Mortgage Finance portfolio due to the impact of the hurricanes that occurred during the third quarter of 2017,
portfolio seasoning, and growth of the portfolio. Nonperforming loans include finance receivables and loans on nonaccrual status when the
principal or interest has been delinquent for 90 days or when full collection is determined not to be probable. Refer to Note 1 to the
Consolidated Financial Statements for additional information.

The following table includes consumer and commercial net charge-offs from finance receivables and loans at gross carrying value and

related ratios.

Year ended December 31, ($ in millions)

Consumer

Commercial

Total finance receivables and loans at gross carrying value

Net charge-offs
(recoveries)

Net charge-off ratios (a)

2017

2016

2017

2016

992

1,010

802

(1)

801

1.3%

—

0.8

1.1%

—

0.7

(a) Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value

and loans held-for-sale during the period for each loan category.

Net charge-offs were $1.0 billion for the year ended December 31, 2017, compared to $801 million for the year ended December 31,
2016. The increase during the year ended December 31, 2017, was driven by the seasoning of recent vintages reflecting our underwriting
strategy to originate consumer automotive assets across a broad credit spectrum and expand our risk-adjusted returns, as well as lower
average sales proceeds on repossessed vehicles.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following discussions titled Consumer Credit Portfolio and Commercial Credit Portfolio relate to consumer and commercial finance

receivables and loans recorded at gross carrying value. Finance receivables and loans recorded at gross carrying value have an associated
allowance for loan losses.

Consumer Credit Portfolio

Our consumer portfolio primarily consists of automotive loans, first mortgages, and home equity loans. Loan losses in our consumer
portfolio are influenced by general business and economic conditions including unemployment rates, bankruptcy filings, and home and used
vehicle prices. Additionally, our consumer credit exposure is significantly concentrated in automotive lending.

Credit risk management for the consumer portfolio begins with the initial underwriting and continues throughout a borrower’s credit life

cycle. We manage consumer credit risk through our loan origination and underwriting policies and the credit approval process. We use
proprietary credit-scoring models to differentiate the expected default rates of credit applicants enabling us to better evaluate credit
applications for approval and to tailor the pricing and financing structure according to this assessment of credit risk. We continuously monitor
and routinely update the inputs of the credit scoring models. These and other actions mitigate but do not eliminate credit risk. Improper
evaluations of a borrower’s creditworthiness, fraud, and/or changes in the applicant’s financial condition after approval could negatively
affect the quality of our portfolio, resulting in loan losses.

Our servicing activities are another key factor in managing consumer credit risk. Servicing activities consist largely of collecting and
processing customer payments, responding to customer inquiries such as requests for payoff quotes, and processing customer requests for
account revisions (such as payment extensions and refinancings). Certain servicing practices are influenced by local laws and regulations.

During the year ended December 31, 2017, the credit performance of the consumer portfolio reflected both our underwriting strategy to
originate consumer automotive assets across a broad credit spectrum, including used, higher LTV, extended term, Growth channel, nonprime,
and nonsubvented finance receivables and loans, as well as high-quality jumbo and LMI mortgage loans that are acquired through bulk loan
purchases and direct-to-consumer mortgage originations. The carrying value of our nonprime consumer automotive loans before allowance
for loan losses represented approximately 12.9% of our total consumer automotive loans at December 31, 2017, compared to approximately
13.8% at December 31, 2016. For information on our consumer credit risk practices and policies regarding delinquencies, nonperforming
status, and charge-offs, refer to Note 1 to the Consolidated Financial Statements.

The following table includes consumer finance receivables and loans recorded at gross carrying value.

Outstanding

Nonperforming (a)

Accruing past due 90
days or more

December 31, ($ in millions)

Consumer automotive (b) (c)

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

2017

2016

2017

2016

2017

2016

68,071

65,793

603

598

— $

11,657

2,093

8,294

2,756

—

Total consumer finance receivables and loans

81,821

76,843

720

697

— $

—

(a)
(b)

(c)

Includes nonaccrual TDR loans of $219 million and $240 million at December 31, 2017, and December 31, 2016, respectively.
Includes $18 million and $43 million of fair value adjustment for loans in hedge accounting relationships at December 31, 2017, and December 31, 2016,
respectively. Refer to Note 22 to the Consolidated Financial Statements for additional information.
Includes outstanding CSG loans of $7.3 billion and $6.7 billion at December 31, 2017, and December 31, 2016, respectively, and RV loans of $1.8 billion
and $1.7 billion at December 31, 2017, and December 31, 2016, respectively.

Total consumer outstanding finance receivables and loans increased $5.0 billion at December 31, 2017, compared with December 31,
2016, reflecting an increase of $2.7 billion of consumer mortgage finance receivables and loans and an increase of $2.3 billion of consumer
automotive finance receivables and loans. The increase in consumer mortgage finance receivables and loans was primarily due to growth
within the Mortgage Finance portfolio as a result of the execution of bulk loan purchases totaling $4.5 billion during the year ended
December 31, 2017, partially offset by total consumer mortgage portfolio runoff. The increase in consumer automotive finance receivables
and loans was primarily related to continued momentum in our growth channel, lower levels of off-balance sheet sales, and our election to not
renew a retail automotive credit conduit facility and the related purchase of the underlying collateral, which included approximately $521
million of retail automotive loans, during the second quarter of 2017.

Total consumer nonperforming finance receivables and loans at December 31, 2017, increased $23 million to $720 million from

December 31, 2016, reflecting an increase of $18 million of consumer mortgage nonperforming finance receivables and loans and an increase
of $5 million of consumer automotive finance receivables and loans. The increase in nonperforming consumer mortgage finance receivables
and loans was primarily driven by the Mortgage Finance portfolio due to the impact of the hurricanes that occurred during the third quarter of
2017, portfolio seasoning and growth of the portfolio. The increase in nonperforming consumer automotive finance receivables and loans was
primarily due to portfolio growth. Refer to Note 9 to the Consolidated Financial Statements for additional information. Nonperforming
consumer finance receivables and loans as a percentage of total outstanding consumer finance receivables and loans remained flat at 0.9% at
both December 31, 2017, and December 31, 2016.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Consumer automotive loans accruing and past due 30 days or more increased $177 million to $2.3 billion at December 31, 2017,
compared with December 31, 2016, primarily due to portfolio growth, as well as the changing composition of the portfolio due to our
underwriting strategy to originate consumer automotive assets across a broad credit spectrum.

The following table includes consumer net charge-offs from finance receivables and loans at gross carrying value and related ratios.

Year ended December 31, ($ in millions)

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer finance receivables and loans

Net charge-offs

Net charge-off ratios (a)

2017

2016

2017

2016

986

795

1.5%

1.2%

992

—

802

—

0.2

1.3

—

0.2

1.1

(a) Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value

and loans held-for-sale during the period for each loan category.

Our net charge-offs from total consumer finance receivables and loans were $992 million for the year ended December 31, 2017,
compared to $802 million for the year ended December 31, 2016. The increase during the year ended December 31, 2017, was driven by the
seasoning of recent vintages reflecting our underwriting strategy to originate consumer automotive assets across a broad credit spectrum and
expand our risk-adjusted returns, as well as lower average sales proceeds on repossessed vehicles.

The following table summarizes total consumer loan originations for the periods shown. Total consumer loan originations include loans

classified as finance receivables and loans and loans held-for-sale during the period.

Year ended December 31, ($ in millions)

Consumer automotive

Consumer mortgage (a)

Total consumer loan originations

2017

2016

30,448

284

30,732

32,619

32,626

(a) Excludes bulk loan purchases associated with our Mortgage Finance operations and includes $136 million of loans originated as held-for-sale for the year

ended December 31, 2017.

Total consumer loan originations decreased $1.9 billion for the year ended December 31, 2017, compared to the year ended December
31, 2016. The decrease was primarily due to lower consumer automotive volume in the GM channel with our continued focus on obtaining
appropriate risk-adjusted returns.

The following table shows the percentage of total consumer finance receivables and loans recorded at gross carrying value by state

concentration. Total consumer automotive loans were $68.1 billion and $65.8 billion at December 31, 2017, and December 31, 2016,
respectively. Total mortgage and home equity loans were $13.8 billion and $11.1 billion at December 31, 2017, and December 31, 2016,
respectively.

December 31,

California

Texas

Florida

Pennsylvania

Illinois

Georgia

North Carolina

Ohio

New York

Missouri

Other United States

Total consumer loans

2017 (a)

2016

Consumer
automotive

Consumer
mortgage

Consumer
automotive

Consumer
mortgage

8.2%

13.2

8.5

4.6

4.2

3.7

3.4

3.0

2.9

34.6%

6.5

4.8

1.5

3.2

2.5

1.8

0.5

2.2

0.9

7.8%

13.6

8.2

4.7

4.3

3.6

3.5

3.2

2.8

34.2%

6.6

4.4

1.5

3.4

2.2

1.6

0.5

1.9

1.2

44.1

41.5

44.0

42.5

100.0%

(a) Presentation is in descending order as a percentage of total consumer finance receivables and loans at December 31, 2017.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

We monitor our consumer loan portfolio for concentration risk across the states in which we lend. The highest concentrations of
consumer loans are in California and Texas, which represented an aggregate of 24.7% and 24.2% of our total outstanding consumer finance
receivables and loans at December 31, 2017, and December 31, 2016, respectively. Our consumer mortgage loan portfolio concentration
within California, which is primarily composed of high-quality jumbo mortgage loans, generally aligns to the California share of jumbo
mortgages nationally.

Repossessed and Foreclosed Assets

We classify an asset as repossessed or foreclosed, which is included in other assets on our Consolidated Balance Sheet, when physical
possession of the collateral is taken. We dispose of the acquired collateral in a timely fashion in accordance with regulatory requirements. For
more information on repossessed and foreclosed assets, refer to Note 1 to the Consolidated Financial Statements.

Repossessed consumer automotive loan assets in our Automotive Finance operations at December 31, 2017, increased $5 million to $140
million from December 31, 2016. Foreclosed mortgage assets at December 31, 2017, decreased $3 million to $10 million from December 31,
2016.

Commercial Credit Portfolio

Our commercial portfolio consists primarily of automotive loans through the extension of wholesale floorplan financing, as well as
automotive dealer term real estate loans, automotive fleet financing, equipment financing, as well as other commercial loans. Wholesale
floorplan loans are secured by the vehicles financed (and all other vehicle inventory), which provide strong collateral protection in the event
of dealership default. Additional collateral (e.g., blanket lien over all dealership assets) and/or other credit enhancements (e.g., personal
guarantees from dealership owners) are typically obtained to further mitigate credit risk. Furthermore, we benefit from automotive
manufacturer repurchase arrangements, which serve as an additional layer of protection in the event of repossession of dealership inventory
and/or dealership franchise termination.

Within our commercial portfolio, we utilize an internal credit risk rating system that is fundamental to managing credit risk exposure
consistently across various types of commercial borrowers and captures critical risk factors for each borrower. The ratings are used for many
areas of credit risk management, including loan origination, portfolio risk monitoring, management reporting, and loan loss reserves analyses.
Therefore, the rating system is critical to an effective and consistent credit risk management framework.

During the year ended December 31, 2017, the credit performance of the commercial portfolio remained strong, as nonperforming
finance receivables and loans decreased and net charge-offs realized remained low. For information on our commercial credit risk practices
and policies regarding delinquencies, nonperforming status, and charge-offs, refer to Note 1 to the Consolidated Financial Statements.

The following table includes total commercial finance receivables and loans reported at gross carrying value.

Outstanding

Nonperforming (a)

Accruing past due 90
days or more

2017

2016

2017

2016

2017

2016

December 31, ($ in millions)

Commercial and industrial

Automotive

Other (b)

Commercial real estate

33,025

35,041

3,887

4,160

3,248

3,812

— $

—

122

— $

—

Total commercial finance receivables and loans

41,072

42,101

(a)
Includes nonaccrual TDR loans of $51 million and $46 million at December 31, 2017, and December 31, 2016, respectively.
(b) Other commercial primarily includes senior secured commercial lending largely associated with our Corporate Finance operations.

Total commercial finance receivables and loans outstanding decreased $1.0 billion from December 31, 2016, to $41.1 billion at

December 31, 2017. The decrease was primarily due to a reduction in the number of dealer relationships due to the competitive environment
across the automotive lending market, as well as lower dealer inventory levels year over year. This decrease was slightly offset by the ongoing
demand for automotive dealer term loans and from growth in our Corporate Finance portfolio in line with our business strategy.

Total commercial nonperforming finance receivables and loans were $72 million at December 31, 2017, reflecting a decrease of $50
million when compared to December 31, 2016. The decrease was primarily due to reductions within our Corporate Finance portfolio as a
result of the payoff of one loan and the recognition of a partial charge-off on a loan that was restructured during the year, as well as lower
dealer inventory levels in our commercial automotive portfolio year over year. Nonperforming commercial finance receivables and loans as a
percentage of outstanding commercial finance receivables and loans decreased to 0.2% at December 31, 2017, compared to 0.3% at
December 31, 2016.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table includes total commercial net charge-offs from finance receivables and loans at gross carrying value and related

ratios.

Year ended December 31, ($ in millions)

Commercial and industrial

Automotive

Other

Total commercial finance receivables and loans

Net charge-offs
(recoveries)

Net charge-off ratios (a)

2017

2016

2017

2016

(2)

(1)

—%

0.5

—

—%

(0.1)

—

(a) Net charge-off ratios are calculated as net charge-offs divided by average outstanding finance receivables and loans excluding loans measured at fair value

and loans held-for-sale during the period for each loan category.

Our net charge-offs from total commercial finance receivables and loans were $18 million for the year ended December 31, 2017,
compared to net recoveries of $1 million for 2016. The increase in the year ended December 31, 2017, was primarily driven by one account
within the Corporate Finance portfolio that was restructured during the year, resulting in the recognition of a partial charge-off.

Commercial Real Estate

The commercial real estate portfolio consists of finance receivables and loans issued primarily to automotive dealers. Commercial real

estate finance receivables and loans were $4.2 billion and $3.8 billion at December 31, 2017, and December 31, 2016, respectively.

The following table presents the percentage of total commercial real estate finance receivables and loans by state concentration. These

finance receivables and loans are reported at gross carrying value.

December 31,

Texas

Florida

California

Michigan

Georgia

New Jersey

North Carolina

South Carolina

Pennsylvania

Missouri

Other United States

Total commercial real estate finance receivables and loans

Commercial Criticized Exposure

2017

2016

15.7%

10.3

16.1%

10.2

8.2

7.7

4.6

3.6

3.5

3.0

2.4

7.9

7.6

3.6

4.2

3.6

2.7

3.1

2.5

37.4

38.5

100.0%

Finance receivables and loans classified as special mention, substandard, or doubtful are reported as criticized. These classifications are

based on regulatory definitions and generally represent finance receivables and loans within our portfolio that have a higher default risk or
have already defaulted. These finance receivables and loans require additional monitoring and review including specific actions to mitigate
our potential loss.

Total criticized exposures increased $390 million from December 31, 2016, to $3.1 billion at December 31, 2017. The increase was
primarily due to the Corporate Finance portfolio and is in line with the overall growth in Corporate Finance loan balances, as well as the
reclassification of certain accounts to special mention within the commercial automotive portfolio.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table presents the percentage of total commercial criticized finance receivables and loans by industry concentration. These

finance receivables and loans within our automotive and Corporate Finance portfolios are reported at gross carrying value.

December 31,

Industry

Automotive

Services

Health/Medical

Other

Total commercial criticized finance receivables and loans

Selected Loan Maturity and Sensitivity Data

2017

2016

76.3%

81.2%

6.7

4.9

12.1

6.3

2.3

10.2

100.0%

The table below shows the maturity of the commercial finance receivables and loans portfolio and the distribution between fixed and

floating interest rates based on the stated terms of the commercial loan agreements. This portfolio is reported at gross carrying value.

December 31, 2017 ($ in millions)

Commercial and industrial

Commercial real estate

Total commercial finance receivables and loans

Loans at fixed interest rates

Loans at variable interest rates

Total commercial finance receivables and loans

Within 1
year (a)

31,473

183

31,656

1–5 years

After
5 years

4,502

1,627

6,129

1,620

4,509

6,129

937

2,350

3,287

2,424

863

3,287

Total (b)

36,912

4,160

41,072

Includes loans (e.g., floorplan) with revolving terms.

(a)
(b) Loan maturities are based on the remaining maturities under contractual terms.

Allowance for Loan Losses

The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans.

Year ended December 31, 2017 ($ in millions)

Consumer
automotive

Consumer
mortgage

Total
consumer

Commercial

Total

Allowance at January 1, 2017

932

Charge-offs (a)

Recoveries

Net charge-offs

Provision for loan losses

Other (b)

(1,344)

358

(986)

1,127

(7)

Allowance at December 31, 2017

1,066

Allowance for loan losses to finance receivables and loans

outstanding at December 31, 2017 (c)

Net charge-offs to average finance receivables and loans
outstanding for the year ended December 31, 2017

Allowance for loan losses to total nonperforming finance

receivables and loans at December 31, 2017 (c)

Ratio of allowance for loan losses to net charge-offs at

December 31, 2017

1.6%

1.5%

(30)

(6)

(7)

0.6%

0.1%

1,023

(1,374)

382

(992)

1,120

(6)

121

(18)

—

(18)

—

1,144

(1,392)

382

(1,010)

1,148

(6)

1,145

131

1,276

1.4%

1.3%

0.3%

—%

1.0%

0.8%

176.9%

67.3%

159.1%

182.2%

161.2%

1.1

12.2

1.2

7.3

1.3

(a) Represents the amount of the gross carrying value directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the

difference between the gross carrying value of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial
Statements for more information regarding our charge-off policies.

(b) Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.
(c) 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 gross carrying value.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Year ended December 31, 2016 ($ in millions)

Consumer
automotive

Consumer
mortgage

Total
consumer

Commercial

Total

Allowance at January 1, 2016

834

Charge-offs (a)

Recoveries

Net charge-offs

Provision for loan losses

Other (b)

Allowance at December 31, 2016

Allowance for loan losses to finance receivables and loans

outstanding at December 31, 2016 (c)

Net charge-offs to average finance receivables and loans
outstanding for the year ended December 31, 2016

Allowance for loan losses to total nonperforming finance

receivables and loans at December 31, 2016 (c)

Ratio of allowance for loan losses to net charge-offs at

December 31, 2016

(1,102)

307

(795)

919

(26)

932

1.4%

1.2%

114

(39)

(7)

(16)

—

0.8%

0.1%

948

106

1,054

(1,141)

339

(802)

903

(26)

(1)

—

(1,142)

341

(801)

917

(26)

1,023

121

1,144

1.3%

1.1%

0.3%

—%

1.0%

0.7%

155.8%

92.1%

146.8%

99.3%

139.7%

1.2

13.7

1.3

n/m

1.4

n/m = not meaningful
(a) Represents the amount of the gross carrying value directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the

percentage of the gross carrying value.

The allowance for consumer loan losses at December 31, 2017, increased $122 million compared to December 31, 2016. The increase

was primarily driven by our consumer automotive portfolio and reflects the changing composition of our asset mix across a broad credit
spectrum, consistent with our underwriting strategy, and higher consumer automotive loan balances. Additionally, we increased the allowance
for loan losses by $53 million during the third quarter of 2017 due to estimated impacts of Hurricanes Harvey and Irma. We utilized a variety
of available information to assess our ability to collect outstanding balances from affected customers. Our analysis included factors such as
damage to loan collateral, customer insurance coverage and financial hardship, the effects of temporarily offering loan extensions to
borrowers and suspending certain collection activities, as well as historical data, market data, and many other factors. As of December 31,
2017, we maintain a reserve of $45 million due to estimated impacts of the hurricanes, and we expect to incur related losses throughout 2018.
This increase was partially offset by a decrease in the allowance for loan losses in our legacy mortgage portfolio as it continues to run off.

The allowance for commercial loan losses increased $10 million at December 31, 2017, compared to December 31, 2016. The increase

was primarily driven by growth experienced in our Corporate Finance portfolio. There was no increase to the allowance for commercial loans
during the year attributable to the impacts of Hurricanes Harvey and Irma, primarily due to insurance coverage requirements maintained by
our borrowers and due to proactive risk management activities taken in partnership with our dealer network to safeguard vehicle inventories.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Allowance for Loan Losses by Type

The following table summarizes the allocation of the allowance for loan losses by product type.

December 31, ($ in millions)

Consumer

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer loans

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial loans

2017

2016

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

1,066

1.6%

83.5% $

932

1.4%

81.4%

1,145

131

1,276

0.2

2.9

0.6

1.4

0.1

1.7

0.6

0.3

1.0

1.5

4.7

6.2

89.7

2.9

5.4

2.0

10.3

100.0% $

1,023

121

1,144

0.1

2.9

0.8

1.3

0.1

2.0

0.7

0.3

1.0

7.0

8.0

89.4

2.8

5.6

2.2

10.6

100.0%

Total allowance for loan losses

Provision for Loan Losses

The following table summarizes the provision for loan losses by product type.

Year ended December 31, ($ in millions)

2017

2016

2015

Consumer

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer loans

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial loans

Total provision for loan losses

1,127

919

739

(15)

(7)

1,120

(4)

(12)

(16)

903

1,148

917

(6)

740

(34)

(9)

(33)

707

The provision for consumer loan losses increased $217 million for the year ended December 31, 2017, compared to the year ended 2016.

The increase during the year ended December 31, 2017, was primarily driven by our consumer automotive portfolio. The increase in
provision for loan losses for the year ended December 31, 2017, was primarily due to higher net charge-offs in our consumer automotive
portfolio as a result of our focus on originating across a broad credit spectrum and retail asset growth. Additionally, provision expense
increased due to estimated impacts of Hurricanes Harvey and Irma resulting in an increase to provision expense of $53 million during the
third quarter of 2017, which most notably impacted our retail automotive loan portfolio. We continue to maintain a reserve of $45 million as
of December 31, 2017, and expect to incur related losses throughout 2018.

The provision for commercial loan losses increased $14 million for the year ended December 31, 2017, compared to the year ended

2016. The increase was primarily due to higher provision expense for individually impaired loans, and increased reserves due primarily to
continued asset growth within the Corporate Finance portfolio, compared to 2016.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

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. However, certain automotive manufacturers have provided their guarantee for portions of our residual exposure for lease
programs with them. 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 the section titled 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 of the lease
vehicle. This evaluation is primarily based on a proprietary model, which includes variables such as age, expected mileage,
seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and
unanticipated shifts in used vehicle supply. This internally-generated data is compared against third-party, independent data for
reasonableness. Periodically, we revise the projected value of the leased vehicle at termination based on current market conditions
and adjust depreciation expense if necessary over the remaining life of the contract. At termination, our actual sales proceeds from
remarketing the vehicle may be higher or lower than the estimated residual value resulting in a gain or loss on remarketing recorded
through depreciation expense.

Remarketing abilities — Our ability to efficiently process and effectively market off-lease vehicles affects the disposal costs and
the proceeds realized from vehicle sales. Vehicles can be remarketed through auction (internet and physical), sale to dealer, sale to
lessee, and other methods. The results within these channels vary, with physical auction typically resulting in the lowest-priced
outcome.

• Manufacturer vehicle and marketing programs — Automotive manufacturers influence lease residual results in the following

ways:

The brand image of automotive manufacturers and consumer demand for their products affect residual risk.

Automotive manufacturer marketing programs may influence the used vehicle market for those vehicles through programs

such as incentives on new vehicles, programs designed to encourage lessees to terminate their leases early in conjunction with
the acquisition of a new vehicle (referred to as pull-ahead programs), and special rate used vehicle programs.

• Used vehicle market — We have exposure to changes in used vehicle prices. General economic conditions, used vehicle supply and

demand, and new vehicle market prices heavily influence used vehicle prices.

Lease Vehicle Terminations and Remarketing

The following table summarizes the volume of lease terminations and average gain per vehicle, as well as our methods of vehicle sales at

lease termination, stated as a percentage of total lease vehicle disposals.

Year ended December 31,

Off-lease vehicles terminated (in units)

Average gain per vehicle ($ per unit)

Method of vehicle sales

Auction

Internet

Physical

Sale to dealer, lessee, and other

2017

2016

2015

268,054

307,557

264,256

462

691

1,329

56%

55%

49%

The number of off-lease vehicles remarketed during the year ended December 31, 2017, decreased 13% compared to the year ended

December 31, 2016. The residual risk associated with our operating lease portfolio should continue to decline as the number of lease
terminations continues to outpace lease originations as a result of the runoff of our legacy GM lease portfolio, which we expect to be
substantially wound-down by the second quarter of 2018.

Average gain per vehicle decreased for the year ended December 31, 2017, compared to 2016. The decrease was primarily due to
declining used vehicle values, which were more pronounced in the car market, partially offset by a more favorable termination mix and a
temporary increase in demand for used vehicles during the three months ended December 31, 2017, resulting from hurricane activity. We
expect the mix of trucks and sport utility vehicles in our future lease terminations to continue to increase. For more information on our
investment in operating leases, refer to Note 1 and Note 10 to the Consolidated Financial Statements.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Lease Portfolio Mix

We monitor the concentration of our outstanding operating leases. The following table presents the mix of leased vehicles by type, based

on volume of units outstanding.

December 31,

Sport utility vehicle

Truck

Car

2017

2016

2015

55%

52%

48%

Our overall lease residual exposure has declined in recent years largely as a result of the runoff of our legacy GM lease portfolio.
Primarily because of this, our exposure to Chrysler vehicles has grown and now represents approximately 79% of our lease units as of
December 31, 2017. The following table presents the mix of leased vehicles by manufacturer, based on volume of units outstanding.

December 31,

Chrysler vehicles

GM vehicles

Other

Market Risk

2017

2016

2015

79%

44%

26%

Our automotive financing, mortgage, and insurance activities give rise to market risk representing the potential loss in the fair value of

assets or liabilities and earnings caused by movements in market variables, such as interest rates, foreign-exchange rates, equity prices,
market perceptions of credit risk, and other market fluctuations that affect the value of securities, assets held-for-sale, and operating leases.

We are exposed to interest rate risk arising from changes in interest rates related to financing, investing, and cash management activities.

More specifically, we have entered into contracts to provide financing and to retain various assets related to securitization activities all of
which are exposed in varying degrees to changes in value due to movements in interest rates. Interest rate risk arises from the mismatch
between assets and the related liabilities used for funding. We enter into various financial instruments, including derivatives, to maintain the
desired level of exposure to the risk of interest rate and other fluctuations.

We are also exposed to some foreign-currency risk arising from foreign-currency denominated assets and liabilities, primarily in Canada.

We enter into hedges to mitigate foreign exchange risk.

We also have exposure to equity price risk, primarily in our Insurance operations, which invests in equity securities that are subject to
price risk influenced by capital market movements. We enter into equity options to economically hedge our exposure to the equity markets.
Additionally, we have exposure to equity price risk related to certain share-based compensation programs.

Although the diversity of our activities from our complementary lines of business may partially mitigate market risk, we also actively
manage this risk. We maintain risk management control systems to monitor interest rates, foreign-currency exchange rates, equity price risks,
and any of their related hedge positions. Positions are monitored using a variety of analytical techniques including market value, sensitivity
analysis, and value at risk models. Refer to Note 22 to the Consolidated Financial Statements for further information.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Fair Value Sensitivity Analysis

The following table and subsequent discussion presents a fair value sensitivity analysis of our assets and liabilities using isolated
hypothetical movements in specific market rates. The analysis assumes adverse instantaneous, parallel shifts in market-exchange rates,
interest rate yield curves, and equity prices. Additionally, since only adverse fair value impacts are included, the natural offset between asset
and liability rate sensitivities that arise within a diversified balance sheet, such as ours, is not considered.

December 31, ($ in millions)

Financial instruments exposed to changes in:

Interest rates

Estimated fair value

Effect of 10% adverse change in rates

Foreign-currency exchange rates

Estimated fair value

Effect of 10% adverse change in rates

Equity prices

Estimated fair value

Effect of 10% decrease in prices

2017

2016

(a)

359

(22)

577

(58)

(a)

357

(19)

657

(58)

(a) Refer to the section titled Net Financing Revenue Sensitivity Analysis for information on the interest rate sensitivity of our financial instruments

Net Financing Revenue Sensitivity Analysis

Interest rate risk represents our most significant exposure to market risk. We actively monitor the level of exposure so that movements in

interest rates do not adversely affect future earnings. We use net financing revenue sensitivity analysis as our primary metric to measure and
manage the interest rate sensitivities of our financial instruments.

We prepare our forward-looking baseline forecasts of net financing revenue taking into consideration anticipated future business growth,

asset/liability positioning, and interest rates based on the implied forward curve. The analysis is highly dependent upon a variety of
assumptions including the repricing characteristics of retail deposits with both contractual and non-contractual maturities. During the first
quarter of 2017 we implemented a dynamic pass-through modeling assumption on our retail liquid deposit portfolio, whereby deposit pass-
through levels increase as the absolute level of short-term market interest rates rise. Our baseline forecast assumes a medium-term cumulative
deposit beta on retail liquid products of 30% to 50%, steadily increasing to approximately 75% over the longer term. We assume betas for
deposits with contractual maturities will exceed retail liquid product levels. We continually monitor industry and competitive repricing
activity along with other market factors when contemplating deposit pricing actions.

Simulations are used to assess changes in net financing revenue in multiple interest rate scenarios relative to the baseline forecast. The

changes in net financing revenue relative to the baseline are defined as the sensitivity. Our simulations incorporate contractual cash flows and
repricing characteristics for all assets, liabilities and off-balance sheet exposures and incorporate the effects of changing interest rates on the
prepayment and attrition rates of certain assets and liabilities. Our simulation does not assume any specific future actions are taken to mitigate
the impacts of changing interest rates. Relative to our baseline forecast, which is based on the implied forward curve, our net financing
revenue over the next twelve months would decrease by $14 million if interest rates remain unchanged.

The net financing revenue sensitivity tests measure the potential change in our pretax net financing revenue over the following twelve

months. A number of alternative rate scenarios are tested, including immediate and gradual parallel shocks to the implied market forward
curve.

Management also evaluates nonparallel shocks to interest rates and stresses to certain term points on the yield curve in isolation to

capture and monitor a number of risk types.

Our twelve-month pretax net financing revenue sensitivity based on the market forward-curve was as follows.

Year ended December 31, ($ in millions)

Gradual (a)

Instantaneous

Gradual (a)

Instantaneous

2017

2016

Change in interest rates

-100 basis points

+100 basis points

+200 basis points

(22) $

(14) $

(18)

(68)

(106)

(294)

(2)

(19)

(62)

(153)

(a) Gradual changes in interest rates are recognized over 12 months.

The implied forward rate curve has flattened since December 31, 2016, as short-end rates have increased more than long-end rates. The

impact of this change is reflected in our baseline net financing revenue projections. We remain moderately liability-sensitive as of

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

December 31, 2017, in the upward interest rate shock scenarios as our simulation models assume liabilities will initially reprice faster than
assets. Exposure in the +100 instantaneous shock scenario has increased as of December 31, 2017, primarily due to higher short-term interest
rates and the related impact on liquid deposit re-pricing assumptions. In addition, changes to our derivative hedging position contributed to
our increased liability sensitivity position during the year. The exposure in the +200 interest rate shock has increased largely as a result of our
assumption that deposit pass-through levels increase with higher interest rates.

The exposure in the downward instantaneous interest rate shock scenario continues to benefit net financing revenue as of December 31,

2017.

Our risk position is also influenced by the net impact of derivative hedging positions, which continue to generate positive financing
revenue in the current interest rate environment. This position includes interest rate swaps designated as fair value hedges of certain fixed-rate
assets and fixed-rate debt instruments, and pay-fixed interest rate swaps designated as cash flow hedges of certain floating-rate debt
instruments. The size, maturity, and mix of our hedging activities changes frequently as we adjust our broader ALM objectives. The
enhancements to the financial reporting of hedging relationships provided by our early adoption of ASU 2017-12, Derivatives and Hedging —
Targeted Improvements to Accounting for Hedging Activities on January 1, 2018, provides us with additional capacity to affect our hedging
strategy. In the first quarter of 2018, we initiated a hedge program of pay-fixed interest rate swaps on certain automotive assets that allows us
to reduce our sensitivity to a rise in short-term interest rates beyond the implied forward curve.

Operational Risk

Operational risk is the risk of loss or harm arising from inadequate or failed processes or systems, human factors, or external events.

Operational risk is an inherent risk element in each of our businesses and related support activities. Such risk can manifest in various ways,
including errors, business interruptions, and inappropriate behavior of employees, and can potentially result in financial losses and other
damage to us. We consider the following types of operational risk: model, compliance, legal, fraud, supplier management, fiduciary, and
information technology, which includes the risk of cyber attacks.

To monitor and mitigate such risk, we maintain a system of policies and a control framework designed to provide a sound and well-

controlled operational environment. This framework employs practices and tools designed to maintain risk identification, risk governance,
risk and control assessment and testing, risk monitoring, and transparency through risk reporting mechanisms. The goal is to maintain
operational risk at appropriate levels based on our financial strength, the characteristics of the businesses and the markets in which we
operate, and the related competitive and regulatory environment.

Financial institutions continue to be the target of various cyber attacks, including malware and denial-of-service, as part of an effort to

disrupt the operations of financial institutions or obtain confidential, proprietary, or other information. Cyber security and the continued
development of our controls, processes, and systems to protect our networks, computers, and software remain an ongoing priority.

Notwithstanding these risk and control initiatives, we may incur losses attributable to operational risks from time to time, and there can

be no assurance these losses will not be incurred in the future.

Insurance/Underwriting Risk

The underwriting of our VSCs and insurance policies includes an assessment of the risk to determine acceptability and categorization for

appropriate pricing. The acceptability of a particular risk is based on expected losses, expenses and other factors specific to the product in
question. With respect to VSCs, considerations include the quality of the vehicles produced, the price of replacement parts, repair labor rates,
and new model introductions. Insurance risk also includes event risk, which is synonymous with pure risk, hazard risk, or insurance risk, and
presents no chance of gain, only of loss.

We mitigate losses by the active management of claim settlement activities using experienced claims personnel and the evaluation of

current period reported claims. Losses for these events may be compared to prior claims experience, expected claims, or loss expenses from
similar incidents to assess the reasonableness of incurred losses.

In some instances, reinsurance is used to reduce the risk associated with volatile lines of businesses, such as catastrophe risk in vehicle

inventory insurance. Our vehicle inventory insurance product is covered by excess of loss protection, including catastrophe coverage for
weather-related events. In addition, loss control techniques such as storm path monitoring to assist dealers in preparing for severe weather
help to mitigate loss potential.

In accordance with industry and accounting practices and applicable insurance laws and regulatory requirements, we maintain reserves

for reported losses, losses incurred but not reported, losses expected to be incurred in the future for contracts in force and loss adjustment
expenses. The estimated values of our prior reported loss reserves and changes to the estimated values are routinely monitored by credentialed
actuaries. Our reserve estimates are regularly reviewed by management; however, since the reserves are based on estimates and numerous
assumptions, the ultimate liability may differ from the amount estimated.

Business/Strategic Risk

Business/strategic risk is embedded in every facet of our organization and is one of our primary risk types. It is the risk that results from

incorrect assumptions, inappropriate business plans, ineffective business strategy execution, or failure to respond in a timely manner to
changes in the regulatory, macroeconomic or competitive environments, in the geographic locations in which we operate, competitor actions,
changing customer preferences, product obsolescence, and technology developments. We aim to mitigate this risk within our business units

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

through portfolio diversification, product innovations, and close monitoring of the execution of our strategic and capital plan, and ensuring
flexibility of the cost base (e.g., through outsourcing).

The strategic plan is reviewed and approved annually by the Board, as are the capital plan, financial business plan, and risk appetite.

With oversight by the Board, executive management seeks to ensure that consistency is applied while executing our strategic plan, core
operating principles, and risk appetite. The executive management team continuously monitors business performance throughout the year to
assess strategic risk and find early warning signals so that risks can be proactively managed. Executive management regularly reviews actual
performance versus the plan, updates the Board via reporting routines and implements changes as deemed appropriate.

Significant strategic actions, such as capital actions, material acquisitions or divestitures, and recovery and resolution plans are reviewed

and approved by the Board as required. At the business level, as we introduce new products, we monitor their performance relative to
expectations. With oversight by the Board, executive management performs similar analyses throughout the year, and evaluates changes to the
financial forecast or the risk, capital or liquidity positions as deemed appropriate to balance and optimize achieving our targeted risk appetite,
stockholder returns, and maintaining our targeted financial strength.

Reputation Risk

Reputation risk is the risk that negative perceptions of our conduct or business practices will adversely affect our profitability or
operations through an inability to establish new or maintain existing customer/client relationships. Reputation risk may result from many of
our activities, including those related to the management of our business/strategic, operational, and credit risks. We manage reputation risk
through established policies and controls in our businesses and risk management processes to mitigate reputation risks in a timely manner and
through proactive monitoring and identification of potential reputation risk events. We have established processes and procedures to respond
to events that give rise to reputation risk, including educating individuals and organizations that influence public opinion, external
communication strategies to mitigate the risk, and informing key stakeholders of potential reputation risks. Primary responsibility for the
identification, escalation and resolution of reputation risk issues resides with our lines of business. Each employee is under an obligation,
within the scope of their activities, to analyze and assess any imminent or intended transaction in terms of possible risk factors in order to
minimize reputation risks. Further, Ally’s strong “LEAD” culture and distinct “Do it Right” philosophy also strengthen our efforts to mitigate
reputational risks by promoting a transparent culture where every associate is expected to act as a risk manager. Ally’s culture is proactive
with its core principles embedded at all levels of the organization so that any associate, at any time, can and should call attention to risks to
ensure they are fully addressed and taken into account. Our organization and governance structure provides oversight of reputation risks, and
key risk indicators are reported regularly and directly to management and the RC, which provide primary oversight of reputation risk.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Liquidity Management, Funding, and Regulatory Capital
Overview

The purpose of liquidity management is to ensure our ability to meet loan and lease demand, debt maturities, deposit withdrawals, and
other cash commitments under both normal operating conditions as well as periods of economic or financial stress. Our primary objective is
to maintain cost-effective, stable and diverse sources of funding capable of sustaining the organization throughout all market cycles. Sources
of funding include both retail and brokered deposits and secured and unsecured market-based funding across various maturity, interest rate,
and investor profiles. Additional liquidity is available through a pool of unencumbered highly liquid securities, borrowing facilities,
repurchase agreements, as well as funding programs supported by the FRB and the FHLB of Pittsburgh.

We define liquidity risk as the risk that an institution’s financial condition or overall safety and soundness is adversely affected by an

inability, or perceived inability, to meet its financial obligations, and to withstand unforeseen liquidity stress events. Liquidity risk can arise
from a variety of institution specific or market-related events that could have a negative impact on cash flows available to the organization.
Effective management of liquidity risk helps ensure an organization’s preparedness to meet cash flow obligations caused by unanticipated
events. Managing liquidity needs and contingent funding exposures has proven essential to the solvency of financial institutions.

The Asset-Liability Committee (ALCO) is chaired by the Corporate Treasurer and is responsible for overseeing our liquidity, funding
strategies and plans, contingency funding plans, and counterparty credit exposure arising from financial transactions. Corporate Treasury is
responsible for managing our liquidity positions within prudent operating guidelines and targets approved by ALCO and the RC. As part of
managing liquidity risk, we prepare periodic forecasts depicting anticipated funding needs and sources of funds with oversight and monitoring
by the Liquidity Risk group within Corporate Treasury. Corporate Treasury executes our funding strategies and manages liquidity under
baseline economic projections as well as more severely stressed macroeconomic environments.

Funding Strategy

Liquidity and ongoing profitability are largely dependent on the timely and cost-effective access to retail deposits and funding in
different segments of the capital markets. Our funding strategy largely focuses on the development of diversified funding sources across a
broad base of depositors, lenders, and investors to meet liquidity needs throughout different market cycles, including periods of financial
distress. These funding sources include retail and brokered deposits, committed credit facilities, public and private asset-backed
securitizations, wholesale and retail unsecured debt, FHLB advances, and whole-loan sales. We also supplement these funding sources with a
modest amount of short-term borrowings, including demand notes and repurchase arrangements. The diversity of our funding sources
enhances funding flexibility, limits dependence on any one source, and results in a more cost-effective funding strategy over the long term.
We evaluate funding markets on an ongoing basis to achieve an appropriate balance of unsecured and secured funding sources and maturity
profiles.

We diversify our overall funding in order to reduce reliance on any one source of funding and to achieve a well-balanced funding
portfolio across a spectrum of risk, duration, and cost-of-funds characteristics. Optimizing funding at Ally Bank continues to be a key part of
our long-term liquidity strategy. We optimize our funding sources at Ally Bank by growing retail deposits, maintaining active public and
private securitization programs, managing a prudent maturity profile of our brokered deposit portfolio, utilizing repurchase agreements, and
continuing to access funds from the FHLB.

Since becoming a BHC in December 2008, a significant portion of asset originations have been directed to Ally Bank in order to reduce
parent company exposures and funding requirements, and to utilize our growing consumer deposit-taking capabilities. This has allowed us to
use bank funding for a wider array of our automotive finance assets and to provide a sustainable long-term funding channel for the business,
while also improving the cost of funds for the enterprise. On March 7, 2016, Ally Bank received approval from the FRB to become a state
member bank. Ally Bank is now regulated by the FRB through the Federal Reserve Bank of Chicago, as well as the Utah Department of
Financial Institutions. In addition, in connection with the application for membership in the Federal Reserve System, Ally Bank made
commitments to the FRB relating to capital, liquidity, and business plan requirements. These commitments were consistent with the prior
requirements under the now-terminated Capital and Liquidity Maintenance Agreement with the FDIC, including the requirement to maintain
capital at a level such that Ally Bank’s Tier 1 leverage ratio was at least 15%.

On August 22, 2017, banking agencies lifted the capital, liquidity, and business plan commitments that Ally Bank had made in

connection with its application for membership in the Federal Reserve System, including the commitment to maintain a Tier 1 leverage ratio
of at least 15%. As a result of this development, during the third quarter of 2017, Ally Bank paid a dividend of $2.9 billion to Ally Financial
Inc., which was utilized to reduce less cost-efficient borrowings and further enhance our funding profile. Additionally, a $400 million
dividend was paid from Ally Bank to Ally Financial Inc. during the fourth quarter of 2017.

Liquidity Risk Management

Multiple metrics are used to frame the level of liquidity risk, manage the liquidity position, and identify related trends. These metrics

include coverage ratios and stress tests that measure the sufficiency of the liquidity portfolio, stability ratios that measure longer-term
structural liquidity, and concentration ratios that ensure prudent funding diversification. In addition, we have established internal management
routines designed to review all aspects of liquidity and funding plans, evaluate the adequacy of liquidity buffers, review stress testing results,
and assist management in the execution of its funding strategy and risk management accountabilities.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

We maintain available liquidity in the form of cash, unencumbered highly liquid securities, and available committed credit facility
capacity that, taken together, would allow us to operate and to meet our contractual and contingent obligations in the event that market-wide
disruptions and enterprise-specific events disrupt normal access to funding. We hold available liquidity at various entities, taking into
consideration regulatory restrictions and tax implications that may limit our ability to transfer funds across entities. The following table
summarizes our total available liquidity.

December 31, 2017 ($ in millions)

Unencumbered highly liquid U.S. federal government and U.S. agency securities

Liquid cash and equivalents

Committed funding facilities

Total capacity

Outstanding

Unused capacity (a)

Total available liquidity

10,559

3,757

11,925

8,115

3,810

18,126

(a) Funding from committed secured facilities is available on request in the event excess collateral resides in certain facilities or the extent incremental

collateral is available and contributed to the facilities.

As of December 31, 2017, assuming a long-term capital markets stress, we expect that our available liquidity would allow us to continue

to fund all planned loan originations and meet all of our financial obligations for more than 36 months, assuming no issuance of unsecured
debt or term securitizations.

In addition, our Modified Liquidity Coverage Ratio exceeded 100% at December 31, 2017. Refer to Note 21 to the Consolidated

Financial Statements for further discussion of our liquidity requirements.

Deposits

We obtain retail deposits directly from customers through direct banking via the internet, telephone, mobile, and mail channels. These

retail deposits provide our Automotive Finance, Mortgage Finance, and Corporate Finance operations with a stable and low-cost funding
source. Retail deposit growth is a key driver of optimizing funding costs and reducing reliance on capital markets-based funding. We believe
deposits provide a stable, low-cost source of funds that are less sensitive to interest rate changes, market volatility, or changes in credit ratings
when compared to other funding sources. We have continued to expand our deposit gathering efforts through both direct and indirect
marketing channels. Current retail deposit offerings consist of a variety of products including CDs, savings accounts, money market accounts,
IRA deposit products, as well as an interest checking product. In addition, we utilize brokered deposits, which are obtained through third-
party intermediaries, including a deposit related to Ally Invest customer cash balances.

The following table shows Ally Bank’s number of accounts and our deposit balances by type as of the end of each quarter since 2016.

Number of retail bank

accounts (in thousands)

Deposits ($ in millions)

Retail

Brokered (a)

Other (b)

Total deposits

4th quarter
2017

3rd quarter
2017

2nd quarter
2017

1st quarter
2017

4th quarter
2016

3rd quarter
2016

2nd quarter
2016

1st quarter
2016

2,740

2,603

2,474

2,366

2,269

2,203

2,134

2,062

77,925 $

74,928 $

71,094 $

69,971 $

66,584 $

63,880 $

61,239 $

15,211

15,045

14,937

14,327

12,187

11,570

11,269

120

143

152

188

251

294

58,977

10,979

309

93,256 $

90,116 $

86,183 $

84,486 $

79,022 $

75,744 $

72,802 $

70,265

(a) Brokered deposit balances include a deposit related to Ally Invest customer cash balances deposited at Ally Bank by a third party of $1.2 billion as of the

end of each quarter in 2017, and $200 million as of December 31, 2016.

(b) Other deposits include mortgage escrow, dealer, and other deposits.

During 2017, our deposit base grew $14.2 billion. The recent growth in total deposits has been primarily attributable to our retail deposit
portfolio—particularly within retail CDs, as we capitalized on a shift in consumer preference from savings accounts to CDs. Our savings and
money market accounts also continued to grow in 2017. Strong retention rates and customer acquisition, reflecting the strength of the brand,
continue to drive growth in retail deposits. Moreover, our brokered deposit portfolio continued to grow, driven by the addition of Ally Invest
customer cash and an increase in brokered CDs. Refer to Note 15 to the Consolidated Financial Statements for a summary of deposit funding
by type.

Secured Financings, Securitizations, and Off-balance Sheet Arrangements

In addition to building a larger deposit base, secured funding continues to be a significant source of financing. Securitization has proven

to be a reliable and cost-effective funding source, and we continue to remain active in the well-established securitization markets to finance

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

our automotive loan products. Through securitizations, we are able to convert our financial assets, including finance receivables and operating
leases, into cash earlier than what would have occurred in the normal course of business.

As part of these securitization transactions, we sell assets to various securitization entities. In turn, the securitization entities establish

separate trusts to which they transfer the assets in exchange for the proceeds from the sale of securities issued by the trust. The trusts’
activities are generally limited to acquiring the assets, issuing securities, making payments on the securities, and periodically reporting to the
investors.

These securitization entities are separate legal entities that assume the risks and rewards of ownership of the receivables they hold. The
assets of the securitization entities are not available to satisfy our claims or those of our creditors. In addition, the trusts do not invest in our
equity or in the equity of any of our affiliates. Our economic exposure related to the securitization trusts is generally limited to cash reserves,
retained interests, and customary representation and warranty provisions.

As part of our securitization transactions, we typically agree to service the transferred assets for a fee, and we may also earn other related

fees. The amount of the fees earned is disclosed in Note 12 to the Consolidated Financial Statements. We may also retain a portion of senior
and subordinated interests issued by the trusts. Subordinate interests typically provide credit support to the more highly rated senior interest in
a securitization transaction and may be subject to all or a portion of the first loss position related to the sold assets.

Certain of these securitization transactions meet the criteria to be accounted for as off-balance sheet arrangements if we either do not
hold a potentially significant economic interest or do not provide servicing or asset management functions for the financial assets held by the
securitization entity. Certain of our securitization transactions do not meet the required criteria to be accounted for as off-balance sheet
arrangements; therefore, they are accounted for as secured borrowings. For information regarding our off-balance sheet arrangements and
securitization activities, refer to Note 1 and Note 11 to the Consolidated Financial Statements.

During 2017, we raised $7.3 billion through the completion of term securitization transactions backed by retail automotive loans,

operating leases, and dealer floorplan automotive assets, which includes $1.1 billion through the completion of one off-balance sheet
securitization transaction backed by retail automotive loans. Additionally, for retail automotive loans and leases, the term structure of the
transaction locks in funding for a specified pool of loans and leases, creating an effective tool for managing interest rate and liquidity risk.

We manage secured funding execution risk by maintaining a diverse investor base and available committed credit facility capacity. We

have access to private committed funding facilities, the largest of which is a syndicated credit facility of sixteen lenders secured by
automotive receivables. This facility can fund automotive retail and dealer floorplan loans, as well as leases. During March 2016, this facility
was renewed with $11.0 billion of capacity and the maturity was extended to March 2018. During 2017, we reduced the capacity of this
facility to $7.5 billion. In the event this facility is not renewed at maturity, the outstanding debt will be repaid over time as the underlying
collateral amortizes. At December 31, 2017, there was $4.2 billion outstanding under this facility. Our ability to access the unused capacity in
the secured facility depends on the availability of eligible assets to collateralize the incremental funding and, in some instances, on the
execution of interest rate hedges.

The total capacity in our committed secured funding facilities is provided by banks through private transactions. The committed secured

funding facilities can be revolving in nature and allow for additional funding during the commitment period, or they can be amortizing and
not allow for any further funding after the closing date. At December 31, 2017, all of our $11.9 billion of secured committed capacity was
revolving. Our revolving facilities generally have an original tenor ranging from 364 days to two years. As of December 31, 2017, we had
$2.6 billion of committed funding capacity from revolving facilities with a remaining tenor greater than 364 days. In addition to our
syndicated revolving credit facility, we also maintain various bilateral secured credit facilities that fund our Automotive Finance operations.
These are primarily private securitization facilities that fund a specific pool of automotive assets.

We also have access to funding through advances with the FHLB. These advances are primarily secured by consumer mortgage and

commercial real estate automotive finance receivables and loans. As of December 31, 2017, we had pledged $25.2 billion of assets and
investment securities to the FHLB resulting in $19.4 billion in total funding capacity with $17.7 billion of debt outstanding.

At December 31, 2017, and 2016, $58.8 billion and $65.2 billion of our total assets, respectively, were restricted as collateral for the
payment of debt obligations accounted for as secured borrowings and repurchase agreements. Refer to Note 16 to the Consolidated Financial
Statements for further discussion.

Unsecured Financings

We obtain unsecured funding from the sale of floating-rate demand notes under our Demand Notes program. The holder has the option to

require us to redeem these notes at any time without restriction. Demand Notes outstanding were $3.2 billion at December 31, 2017. We also
have short-term and long-term unsecured debt outstanding from retail term note programs. These programs are composed of callable fixed-
rate instruments with fixed-maturity dates and floating-rate notes. There were $292 million of retail term notes outstanding at December 31,
2017. The remainder of our unsecured debt is composed of institutional term debt. Refer to Note 16 to the Consolidated Financial Statements
for additional information about our outstanding short-term borrowings and long-term unsecured debt.

In December 2016, we closed a private unsecured committed funding facility under which we had access to a term facility with a
commitment of $850 million, and a revolving facility with a commitment of $400 million. In the third quarter of 2017, we extinguished the

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

corresponding debt and terminated these facilities in order to improve our funding profile through the utilization of more cost-efficient
funding.

Other Secured and Unsecured Short-term Borrowings

We have access to repurchase agreements. A repurchase agreement is a transaction in which the firm sells financial instruments to a
buyer, typically in exchange for cash, and simultaneously enters into an agreement to repurchase the same or substantially the same financial
instruments from the buyer at a stated price plus accrued interest at a future date. The financial instruments sold in repurchase agreements
include U.S. government and federal agency obligations, and certificated residual interests related to asset-backed securitizations. As of
December 31, 2017, we had $892 million debt outstanding under repurchase agreements.

Additionally, we have access to the FRB Discount Window and can borrow funds to meet short-term liquidity demands. However, the

FRB is not a primary source of funding for day to day business. Instead, it is a liquidity source that can be accessed in stressed environments
or periods of market disruption. We have assets pledged and restricted as collateral to the FRB totaling $2.3 billion. We had no debt
outstanding with the FRB as of December 31, 2017.

Recent Funding Developments

During 2017, we accessed the public and private markets to execute secured funding transactions, whole-loan sales, unsecured funding

transactions, and funding facility renewals totaling $12.0 billion. Key funding highlights from January 1, 2017, to date were as follows:

• We closed, renewed, increased, and/or extended a net of $4.4 billion in U.S. secured credit facilities during the year ended

December 31, 2017.

• We continued to access the public and private term asset-backed securitization markets raising $7.3 billion during the year ended
December 31, 2017. During 2017, we raised approximately $5.9 billion through securitizations backed by retail automotive loans
and operating leases, which includes $4.4 billion raised through on-balance sheet public securitizations, $1.1 billion raised through
an off-balance sheet public securitization, and $421 million raised through a private operating lease securitization. We also raised
$1.4 billion through public securitizations backed by dealer floorplan automotive assets.

Funding Sources

The following table summarizes our sources of funding and the amount outstanding under each category for the periods shown.

December 31, ($ in millions)

Secured financings

Institutional term debt

Retail debt programs (a)

Total debt (b)

Deposits

On-balance sheet
funding

% Share of funding

2017

2016

2017

2016

36,869

15,099

3,463

55,431

93,256

43,140

19,276

4,070

66,486

79,022

25%

30%

Total on-balance sheet funding

148,687

145,508

100%

Includes $292 million and $448 million of retail term notes at December 31, 2017, and December 31, 2016, respectively.

(a)
(b) Excludes fair value adjustment as described in Note 22 to the Consolidated Financial Statements.

Refer to Note 16 to the Consolidated Financial Statements for a summary of the scheduled maturity of long-term debt at December 31,

2017.

Cash Flows

The following summarizes the activity reflected on the Consolidated Statement of Cash Flows. While this information may be helpful to

highlight certain macro trends and business strategies, the cash flow analysis may not be as relevant when analyzing changes in our net
earnings and net assets. We believe that in addition to the traditional cash flow analysis, the discussion related to liquidity, dividends, and
ALM herein may provide more useful context in evaluating our liquidity position and related activity.

Net cash provided by operating activities was $4.1 billion for the year ended December 31, 2017, compared to $4.6 billion for 2016.
Activity was largely consistent year-over-year, as cash flows from our consumer and commercial lending activities offset declines in our
leasing business.

Net cash used in investing activities was $8.7 billion for the year ended December 31, 2017, compared to $9.1 billion for 2016. The
change was the result of a decrease in net cash outflows from purchases, sales, originations and repayments of finance receivables and loans
of $3.2 billion, and a decrease of $0.4 billion in net cash used by nonmarketable equity investments due primarily the purchase of FRB stock
in 2016 as a requirement of Ally Bank’s membership in the Federal Reserve System. Additionally, net cash outflows due to acquisitions
decreased by $0.3 billion as a result of acquisitions in 2016 that did not recur in 2017. This was offset by an increase in net cash outflows

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

from purchases, sales, and repayments of available-for-sale securities of $2.1 billion. Also contributing to the change was a decrease in net
cash inflows from operating lease activity of $1.5 billion.

Net cash provided by financing activities for the year ended December 31, 2017, was $2.0 billion, compared to net cash provided by
financing activities of $3.7 billion for 2016. The reduction in net cash provided by financing activities was primarily attributable to a $5.8
billion decrease in net cash inflows related to short-term FHLB borrowings, and additional stock repurchases and dividends paid to common
stockholders for a net cash outflow of $0.5 billion during the year ended December 31, 2017, compared to 2016. This was partially offset by
less net outflows for issuance and repayment of long-term debt in the current year, as compared to the prior year by approximately $2.3
billion. Additionally, there was an increase in cash flows associated with deposits of approximately $1.7 billion, and the nonrecurring net cash
outflow of $0.7 billion related to the redemption of Series A preferred stock in 2016.

Capital Planning and Stress Tests

As a BHC with $50 billion or more of total consolidated assets, Ally is required to conduct semi-annual company-run stress tests, is

subject to an annual supervisory stress test conducted by the FRB, and must submit a proposed capital plan to the FRB.

Ally’s proposed capital plan must include an assessment of our expected uses and sources of capital and a description of all planned
capital actions over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any dividend or other
capital distribution, and any similar action that the FRB determines could have an impact on Ally’s capital. The proposed capital plan must
also include a discussion of how Ally, under expected and stressful conditions, will maintain capital commensurate with its risks and above
the minimum regulatory capital ratios, and serve as a source of strength to Ally Bank. The FRB will either object to Ally’s proposed capital
plan, in whole or in part, or provide a notice of non-objection to Ally’s proposed capital plan, and must do so before Ally may take any capital
action. In addition, even if the FRB does not object to our capital plan, Ally may be precluded from or limited in paying dividends or other
capital distributions without the FRB’s approval under certain circumstances—for example, when we would not meet minimum regulatory
capital ratios after giving effect to the distributions.

As part of the 2017 Comprehensive Capital Analysis and Review (CCAR) process, on April 5, 2017, we submitted our 2017 capital plan
and stress test results to the FRB. On June 23, 2017, we publicly disclosed summary results of the stress test under the most severe scenario in
accordance with regulatory requirements. On June 28, 2017, we received a non-objection to our capital plan from the FRB, including the
proposed capital actions contained in our submission. The capital actions included a 50% increase in the quarterly cash dividend on common
stock from $0.08 per share to $0.12 per share, and a 9% increase in our share repurchase program, which has been authorized by the Board,
permitting us to repurchase up to $760 million of our common stock from time to time from the third quarter of 2017 through the second
quarter of 2018. In addition, we submitted to the FRB the results of our company-run mid-cycle stress test conducted under multiple
macroeconomic scenarios and disclosed the results of this stress test under the most severe scenario on October 5, 2017, in accordance with
regulatory requirements. Additionally, in connection with the 2017 CCAR process, on January 10, 2018, the Board declared a quarterly cash
dividend payment of $0.13 per share on all common stock, representing a $0.01 per share increase relative to the prior quarter.

The following table presents information related to our common stock for each quarter since the commencement of our common stock

repurchase programs and initiation of a quarterly cash dividend on common stock.

($ in millions, except per share data; shares in thousands)

Common stock repurchased during period (a)

Approximate dollar value

Number of shares

Number of common shares outstanding

Beginning of period

End of period

4th quarter
2017

3rd quarter
2017

2nd quarter
2017

1st quarter
2017

4th quarter
2016

3rd quarter
2016

190 $

204 $

169 $

167 $

7,033

8,507

10,485

8,097

8,745

159

8,298

443,796

437,054

452,292

443,796

462,193

452,292

467,000

462,193

475,470

467,000

483,753

475,470

Cash dividends declared per common share (b)

0.12 $

0.08 $

0.08

Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(a)
(b) On January 10, 2018, the Board declared a quarterly cash dividend payment of $0.13 per share on all common stock, a $0.01 per share increase relative to

our prior quarterly cash dividend. Refer to Note 32 to the Consolidated Financial Statements for further information regarding this common stock
dividend.

Our ability to make capital distributions, including our ability to pay dividends or repurchase shares of our common stock, will continue

to be subject to the FRB’s review of and non-objection to the actions that we propose each year in our annual capital plan. The amount and
size of any future dividends and share repurchases will depend upon our results of operations, capital levels, future opportunities,
consideration and approval by the Board, and other considerations including the degree of severity of stress scenarios assigned by the FRB as
part of the CCAR process.

In January 2017, the FRB amended the capital planning and stress testing rules, effective for the 2017 cycle and beyond. As a result of

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

CCAR through the supervisory review process. The amendment also decreased the de minimis threshold for the amount of capital that Ally
could distribute to stockholders outside of an approved capital plan without seeking prior approval of the FRB, and modified Ally’s reporting
requirements to reduce unnecessary burdens.

Regulatory Capital

Refer to Note 21 to the Consolidated Financial Statements and the section titled Selected Financial Data within Item 6.

Credit Ratings

The cost and availability of unsecured financing are influenced by credit ratings, which are intended to be an indicator of the

creditworthiness of a particular company, security, or obligation. Lower ratings result in higher borrowing costs and reduced access to capital
markets. This is particularly true for certain institutional investors whose investment guidelines require investment-grade ratings on term debt
and the two highest rating categories for short-term debt (particularly money market investors).

Nationally recognized statistical rating organizations rate substantially all our debt. The following table summarizes our current ratings

and outlook by the respective nationally recognized rating agencies.

Rating agency

Fitch

Moody’s

S&P

DBRS

Short-term

Not Prime

R-3

Senior unsecured
debt

BB+

Ba3

BB+

BBB (Low)

Outlook

Positive

Stable

Date of last action

September 8, 2017 (a)

October 20, 2015 (b)

October 16, 2017 (c)

May 3, 2017 (d)

(a) Fitch affirmed our senior unsecured debt rating of BB+, affirmed our short-term rating of B, and changed the outlook from Stable to Positive on

September 8, 2017.

(b) Moody’s upgraded our senior unsecured debt rating to Ba3 from B1, affirmed our short-term rating of Not Prime, and changed the outlook to Stable on
October 20, 2015. Effective December 1, 2014, we determined to not renew our contractual arrangement with Moody’s related to their providing of our
issuer, senior debt, and short-term ratings. Notwithstanding this, Moody’s has determined to continue to provide these ratings on a discretionary basis.
However, Moody’s has no obligation to continue to provide these ratings, and could cease doing so at any time.

(c) Standard & Poor’s affirmed our senior unsecured debt rating of BB+, affirmed our short-term rating of B, and maintained a Stable outlook on October 16,

2017.

(d) DBRS affirmed our senior unsecured debt rating of BBB (Low), affirmed our short-term rating of R-3, and maintained a Stable outlook on all ratings on

May 3, 2017.

Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity,
asset quality, business mix, level and quality of earnings, and the current operating, legislative, and regulatory environment. Rating agencies
themselves could make or be required to make substantial changes to their ratings policies and practices—particularly in response to
legislative and regulatory changes. Potential changes in rating methodology, as well as in the legislative and regulatory environment, and the
timing of those changes could impact our ratings, which as noted above could increase our borrowing costs and reduce our access to capital.

A credit rating is not a recommendation to buy, sell, or hold securities, and the ratings are subject to revision or withdrawal at any time

by the assigning rating agency. Each rating should be evaluated independently of any other rating.

Guarantees

Guarantees are defined as contracts or indemnification agreements that contingently require us to make payments to third parties based

on changes in an underlying agreement that is related to a guaranteed party. Our guarantees include client securities to a clearing broker,
standby letters of credit, and certain contract provisions associated with securitizations, sales, and divestitures. Refer to Note 29 to the
Consolidated Financial Statements for more information regarding our outstanding guarantees to third parties.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Aggregate Contractual Obligations

The following table provides aggregated information about our outstanding contractual obligations disclosed elsewhere in our

Consolidated Financial Statements.

December 31, 2017 ($ in millions)

Contractually obligated payments due by period

Long-term debt

Total (a)

Scheduled interest payments for fixed-rate long-term

debt

Estimated interest payments for variable-rate long-term

debt (b)

Estimated net payments under interest rate swap

agreements (b)

Lease commitments

Purchase obligations

Bank certificates of deposit (c) (d)

Deposit liabilities without a stated maturity (d) (e)

Total contractually obligated payments due by period

Total other commitments by expiration period

Lending commitments

43,896

49,387

149,512

3,181

Total

Less than
1 year

1–3 years

3–5 years

More than 5
years

45,358

11,109

19,187

7,058

8,004

5,311

4,928

489

123

1,050

399

—

28,770

49,387

90,835

1,206

1,386

630

12,213

—

33,532

638

772

467

—

2,913

—

11,281

868

2,103

3,432

316

—

13,864

469

(a) Total long-term debt amount reflects the remaining principal obligation and excludes net original issue discount of $1.2 billion, unamortized debt issuance

costs of $110 million, and fair value adjustments of $208 million related to fixed-rate debt designated as a hedged item.

(b) Estimated using a forecasted variable interest model, when available, or the applicable variable interest rate as of the most recent reset date prior to
December 31, 2017. For additional information on derivative instruments and hedging activities, refer to Note 22 to the Consolidated Financial
Statements.

(c) Amounts presented exclude unamortized commissions paid to brokers.
(d) Deposits exclude estimated interest payments.
(e) Deposits without a stated maturity are payable on demand and include savings and money market checking, mortgage escrow, dealer, and other deposits;

and are classified above as due in less than one year.

The foregoing table does not include our reserves for insurance losses and loss adjustment expenses, which total $140 million at

December 31, 2017. While payments due on insurance losses are considered contractual obligations because they related to insurance policies
issued by us, the ultimate amount to be paid and the timing of payment for an insurance loss is an estimate subject to significant uncertainty.
Furthermore the majority of the balance is expected to be paid out in less than five years.

The following provides a description of the items summarized in the preceding table of contractual obligations.

Long-term Debt

Amounts represent the scheduled maturity of long-term debt at December 31, 2017, assuming that no early redemptions occur. The
maturity of secured debt may vary based on the payment activity of the related secured assets. The amounts presented are before the effect of
any unamortized discount, debt issuance costs, or fair value adjustment. Refer to Note 16 to the Consolidated Financial Statements for
additional information on our debt obligations. We primarily use interest rate swaps to manage interest rate risk associated with our secured
and unsecured long-term debt portfolio. These derivatives are recorded on the balance sheet at fair value. For additional information on
derivatives, refer to Note 22 to the Consolidated Financial Statements.

Lease Commitments

We have obligations under various operating lease arrangements for real property with noncancelable lease terms that expire after

December 31, 2017. Refer to Note 29 to the Consolidated Financial Statements for additional information.

Purchase Obligations

We enter into multiple contractual arrangements for various services. The arrangements represent fixed payment obligations under our

most significant contracts and primarily relate to contracts with information technology providers. Refer to Note 29 to the Consolidated
Financial Statements for additional information.

Bank Certificates of Deposit

Refer to Note 15 to the Consolidated Financial Statements for additional information.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Lending Commitments

We have outstanding lending commitments with customers. The amounts presented represent the unused portion of those commitments

at December 31, 2017. Refer to Note 29 to the Consolidated Financial Statements for additional information.

Critical Accounting Estimates

Accounting policies are integral to understanding our Management’s Discussion and Analysis of Financial Condition and Results of

Operations. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America (GAAP) requires management to make certain judgments and assumptions, on the basis of information available at the time of the
financial statements, in determining accounting estimates used in the preparation of these statements. Our significant accounting policies are
described in Note 1 to the Consolidated Financial Statements; critical accounting estimates are described in this section. An accounting
estimate is considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time
the accounting estimate was made. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the
results of operations and cash flows. Our management has discussed the development, selection, and disclosure of these critical accounting
estimates with the Audit Committee of the Board, and the Audit Committee has reviewed our disclosure relating to these estimates.

Allowance for Loan Losses

We maintain an allowance for loan losses (the allowance) to absorb probable loan credit losses inherent in the held-for-investment
portfolio. The allowance is maintained at a level that management considers to be adequate based upon ongoing quarterly assessments and
evaluations of collectability and historical loss experience in our lending portfolio. The allowance is management’s estimate of incurred losses
in our lending portfolio and involves significant judgment. Management performs quarterly analyses of these portfolios to determine if
impairment has occurred and to assess the adequacy of the allowance based on historical and current trends and other factors affecting credit
losses. Additions to the allowance are charged to current period earnings through the provision for loan losses; amounts determined to be
uncollectible are charged directly against the allowance, while amounts recovered on previously charged-off accounts increase the allowance.
Determining the appropriateness of the allowance requires management to exercise significant judgment about matters that are inherently
uncertain, including the timing, frequency, and severity of credit losses that could materially affect the provision for loan losses and, therefore,
net income. For additional information regarding our portfolio segments and classes, refer to Note 9 to the Consolidated Financial Statements.
While we attribute portions of the allowance across our lending portfolios, the entire allowance is available to absorb probable loan losses
inherent in our total lending portfolio.

The consumer portfolio segments consist of smaller-balance, homogeneous loans within our Automotive Finance operations and
Mortgage Finance operations. Excluding certain loans that are identified as individually impaired, the allowance for each consumer portfolio
segment (automotive and mortgage) is evaluated collectively. The allowance is based on aggregated portfolio segment evaluations that begin
with estimates of incurred losses in each portfolio segment based on various statistical analyses. We leverage statistical models based on
recent loss trends to develop a systematic incurred loss reserve. These statistical loss forecasting models are utilized to estimate incurred
losses and consider several credit quality indicators including, but not limited to, historical loss experience, current economic conditions,
credit scores, and expected loss factors by loan type. Management believes these factors are relevant to estimate incurred losses and are
updated on a quarterly basis in order to incorporate information reflective of the current economic environment, as changes in these
assumptions could have a significant impact. In order to develop our best estimate of probable incurred losses inherent in the loan portfolio,
management reviews and analyzes the output from the models and may adjust the reserves to take into consideration environmental,
qualitative, and other factors that may not be captured in the models. These adjustments are documented and reviewed through our risk
management processes. Management reviews, updates, and validates its systematic process and loss assumptions on a periodic basis. This
process involves an analysis of loss information, such as a review of loss and credit trends, a retrospective evaluation of actual loss
information to loss forecasts, and other analyses.

The commercial portfolio segment is primarily composed of larger-balance, nonhomogeneous exposures within our Automotive Finance

operations and Corporate Finance operations. These loans are primarily evaluated individually and are risk-rated based on borrower,
collateral, and industry-specific information that management believes is relevant in determining the occurrence of a loss event and measuring
impairment. A loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual
terms of the loan agreement based on current information and events. Management establishes specific allowances for commercial loans
determined to be individually impaired based on the present value of expected future cash flows, discounted at the loans’ effective interest
rate, and the observable market price or the fair value of collateral, whichever is determined to be the most appropriate. Estimated costs to sell
the collateral on a discounted basis are included in the impairment measurement, when appropriate. In addition to the specific allowances for
impaired loans, loans that are not identified as individually impaired are grouped into pools based on similar risk characteristics and
collectively evaluated. These allowances are based on historical loss experience, concentrations, current economic conditions, performance
trends within specific geographic locations, and other qualitative factors identified by management. The commercial historical loss experience
is updated quarterly to incorporate the most recent data reflective of the current economic environment.

The determination of the allowance is influenced by numerous assumptions and many factors that may materially affect estimates of
loss, including volatility of loss given default, probability of default, and rating migration. The critical assumptions underlying the allowance
include: (i) segmentation of each portfolio based on common risk characteristics; (ii) identification and estimation of portfolio indicators and
other factors that management believes are key to estimating incurred credit losses; and (iii) evaluation by management of borrower,
collateral, and geographic information. Management monitors the adequacy of the allowance and makes adjustments as the assumptions in the
underlying analyses change to reflect an estimate of incurred loan losses at the reporting date, based on the best information available at that
85

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

time. In addition, the allowance related to the commercial portfolio segment is influenced by estimated recoveries from automotive
manufacturers relative to guarantees or agreements with them to repurchase vehicles used as collateral to secure the loans. If an automotive
manufacturer is unable to fully honor its obligations, our ultimate loan losses could be higher. To the extent that actual outcomes differ from
our estimates, additional provision for credit losses may be required that would reduce earnings.

Valuation of Automotive Lease Assets and Residuals

We have significant investments in vehicles in our operating lease portfolio. In accounting for operating leases, management must make

a determination at the beginning of the lease contract of the estimated realizable value (i.e., residual value) of the vehicle at the end of the
lease. Residual value represents an estimate of the market value of the vehicle at the end of the lease term. At contract inception, we
determine pricing based on the projected residual value of the lease vehicle. This evaluation is primarily based on a proprietary model, which
includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle,
automotive manufacturer incentives, and shifts in used vehicle supply. This internally-generated data is compared against third-party,
independent data for reasonableness. The customer is obligated to make payments during the term of the lease for the difference between the
purchase price and the contract residual value plus a finance charge. However, since the customer is not obligated to purchase the vehicle at
the end of the contract, we are exposed to a risk of loss to the extent the value of the vehicle is below the residual value estimated at contract
inception. Management periodically performs a detailed review of the estimated realizable value of leased vehicles to assess the
appropriateness of the carrying value of lease assets.

To account for residual risk, we depreciate automotive operating lease assets to expected realizable value on a straight-line basis over the

lease term. The estimated realizable value is initially based on the residual value established at contract inception. Periodically, we revise the
projected value of the lease vehicle at termination based on current market conditions, and other relevant data points, and adjust depreciation
expense as necessary over the remaining term of the lease. Impairment of operating lease assets is assessed upon the occurrence of a
triggering event. Triggering events are systemic, observed events impacting the used vehicle market such as shocks to oil and gas prices that
may indicate impairment of the operating lease asset. Impairment is determined to exist if the expected undiscounted cash flows generated
from the operating lease assets are less than the carrying value of the operating lease assets. If the operating lease assets are impaired, they are
written down to their fair value as estimated by discounted cash flows. There were no such impairment charges in 2017, 2016, or 2015.

Our depreciation methodology for operating lease assets considers management’s expectation of the value of the vehicles upon lease
termination, which is based on numerous assumptions and factors influencing used vehicle values. The critical assumptions underlying the
estimated carrying value of automotive lease assets include: (i) estimated market value information obtained and used by management in
estimating residual values, (ii) proper identification and estimation of business conditions, (iii) our remarketing abilities, and (iv) automotive
manufacturer vehicle and marketing programs. Changes in these assumptions could have a significant impact on the value of the lease
residuals. Expected residual values include estimates of payments from automotive manufacturers related to residual support and risk-sharing
agreements, if any. To the extent an automotive manufacturer is not able to fully honor its obligation relative to these agreements, our
depreciation expense would be negatively impacted.

Fair Value of Financial Instruments

We use fair value measurements to record fair value adjustments to certain instruments and to determine fair value disclosures. Refer to
Note 25 to the Consolidated Financial Statements for a description of valuation methodologies used to measure material assets and liabilities
at fair value and details of the valuation models, key inputs to those models, and significant assumptions utilized. We follow the fair value
hierarchy set forth in Note 25 to the Consolidated Financial Statements in order to prioritize the inputs utilized to measure fair value. We
review and modify, as necessary, our fair value hierarchy classifications on a quarterly basis. As such, there may be reclassifications between
hierarchy levels.

We have numerous internal controls in place to ensure the appropriateness of fair value measurements. Significant fair value

measurements are subject to detailed analytics and management review and approval. We have an established risk management policy and
model validation program. This model validation program ensures a controlled environment is used for the development, implementation, and
operation of models used to generate fair value measurements and change procedures. Further, this program uses a risk-based approach to
determine the frequency at which models are to be independently reviewed and validated to ensure the models are built as intended and are
appropriate for their intended use. Additionally, a wide array of operational controls are in place to ensure the fair value measurements are
reasonable, including controls over the inputs into and the outputs from the fair value measurement models. For example, we backtest the
internal assumptions used within models against actual performance. We also monitor the market for recent trades, market surveys, or other
market information that may be used to benchmark model inputs or outputs. Certain valuations will also be benchmarked to market indices
when appropriate and available. We have scheduled model and/or input recalibrations that occur on a periodic basis but will recalibrate earlier
if significant variances are observed as part of the backtesting or benchmarking noted above.

Considerable judgment is used in forming conclusions from market observable data used to estimate our Level 2 fair value

measurements and in estimating inputs to our internal valuation models used to estimate our Level 3 fair value measurements. Level 3 inputs
such as interest rate movements, prepayment speeds, credit losses, and discount rates are inherently difficult to estimate. Changes to these
inputs can have a significant effect on fair value measurements. Accordingly, our estimates of fair value are not necessarily indicative of the
amounts that could be realized or would be paid in a current market exchange.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Legal and Regulatory Reserves

Our legal and regulatory reserves reflect management’s best estimate of probable losses on legal and regulatory matters. As a legal or
regulatory matter develops, management, in conjunction with internal and external counsel handling the matter, evaluates on an ongoing basis
whether the matter presents a loss contingency that is both probable and estimable. If, at the time of evaluation, the loss contingency related to
a legal or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would
make the loss contingency both probable and estimable. When the loss contingency related to a legal or regulatory matter is deemed to be
both probable and estimable, we will establish a liability with respect to the loss contingency and record a corresponding expense. To estimate
the probable loss, we evaluate the individual facts and circumstances of the case including information learned through the discovery process,
rulings on dispositive motions, settlement discussions, our prior history with similar matters and other rulings by courts, arbitrators or others.
The reserves are continuously monitored and updated to reflect the most recent information related to each matter.

Additionally, in matters for which a loss event is not deemed probable, but rather reasonably possible to occur, we attempt to estimate a
loss or range of loss related to that event, if possible. For these matters, we do not record a liability. However, if we are able to estimate a loss
or range of loss, we disclose this loss, if it is material to our financial statements. To estimate a range of probable or reasonably possible loss,
we evaluate each individual case in the manner described above. We do not accrue for or disclose matters for which a loss event is deemed
remote.

For details regarding the nature of all material contingencies, refer to Note 30 to the Consolidated Financial Statements.

Determination of Provision for Income Taxes

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best
assessment of estimated current and future taxes to be paid. We are subject to income taxes predominantly in the United States. Significant
judgments and estimates are required in determining consolidated income tax expense. Deferred income taxes arise from temporary
differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax
assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of
deferred tax liabilities, projected future taxable income, tax planning strategies, and recent results of operations. In projecting future taxable
income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of
future state, federal, and foreign pretax operating income. These assumptions about future taxable income require significant judgment and
are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that
historical results provide, we consider three years of cumulative operating income (loss).

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future

realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credits, state net
operating loss carryforwards, and state capital loss carryforwards will not be realized. In recognition of this risk, we continue to provide a
partial valuation allowance on the deferred tax assets.

For additional information regarding our provision for income taxes, refer to Note 23 to the Consolidated Financial Statements.

Recently Issued Accounting Standards

Refer to Note 1 to the Consolidated Financial Statements for further information related to recently adopted and recently issued

accounting standards.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Statistical Tables

The accompanying supplemental information should be read in conjunction with the more detailed information, including our

Consolidated Financial Statements and the notes thereto, which appears elsewhere in this Annual Report.

Net Interest Margin Table

The following table presents an analysis of net yield on interest-earning assets (or net interest margin) excluding discontinued operations

for the periods shown.

Year ended December 31, ($ in millions)

Average
balance (a)

Assets

2017

Interest
income/
Interest
expense

2016

Interest
income/
Interest
expense

2015

Interest
income/
Interest
expense

Yield/
rate

Average
balance (a)

Yield/
rate

Average
balance (a)

Interest-bearing cash and cash equivalents

3,086

1.20% $

2,657

0.53% $

3,702

0.22%

Federal funds sold and securities purchased

under resale agreements

Investment securities (b)

Loans held-for-sale, net

—

22,784

—

568

—

Finance receivables and loans, net (c) (d)

119,040

5,819

Investment in operating leases, net (e)

Other earning assets

Total interest-earning assets

Noninterest-bearing cash and cash

equivalents

Other assets

Allowance for loan losses

Total assets

Liabilities

—

2.49

—

4.89

6.36

3.41

4.55

18,255

113,140

13,791

864

—

411

—

5,162

942

148,717

6,536

—

2.25

—

4.56

6.83

0.81

4.39

17,643

884

104,294

18,058

—

381

4,570

1,149

—

144,583

6,148

—

2.16

4.52

4.38

6.36

—

4.25

1,412

8,291

(1,095)

1,522

8,567

(985)

9,791

908

623

155,614

7,078

827

7,686

(1,208)

162,919

157,325

$ 153,687

Interest-bearing deposit liabilities

86,631

$ 1,077

1.24% $

72,515

Short-term borrowings

Long-term debt (d)

Total interest-bearing liabilities

Noninterest-bearing deposit liabilities

9,055

48,989

144,675

101

127

1,653

2,857

1.40

3.37

1.97

6,161

59,792

138,468

830

1,742

2,629

1.14% $

62,086

718

1.16%

0.93

2.91

1.90

6,289

66,100

134,475

1,662

2,429

0.78

2.51

1.81

Total funding sources

144,776

2,857

1.97

138,562

2,629

1.90

134,560

2,429

1.81

Other liabilities

Total liabilities

Total equity

4,652

149,428

13,491

Total liabilities and equity

162,919

Net financing revenue and other interest

income

Net interest spread (f)

Net yield on interest-earning assets (g)

5,090

143,652

13,673

157,325

4,302

138,862

14,825

$ 153,687

$ 4,221

$ 3,907

$ 3,719

2.58%

2.71%

2.49%

2.63%

2.44%

2.57%

(a) Average balances are calculated using a combination of monthly and daily average methodologies.
(b) Amounts for the years ended December 31, 2015, were adjusted to include previously excluded equity investments with an average balance of $941 million at December 31,

2015, and related dividend income on equity investments of $25 million during the year ended December 31, 2015. Yields on available-for-sale debt securities are based on fair
value as opposed to amortized cost. Yields on held-to-maturity securities are based on amortized cost.

(c) Nonperforming finance receivables and loans are included in the average balances. For information on our accounting policies regarding nonperforming status, refer to Note 1

(d)
(e)

to the Consolidated Financial Statements.
Includes the effects of derivative financial instruments designated as hedges.
Includes gains on sale of $124 million, $213 million, $351 million, for the years ended December 31, 2017, 2016, and 2015, respectively. Excluding these gains on sale, the
yield would be 5.10%, 5.29%, and 4.42% for the years ended December 31, 2017, 2016, and 2015, respectively.

(f) Net interest spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities.
(g) Net yield on interest-earning assets represents net financing revenue and other interest income as a percentage of total interest-earning assets.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

The following table presents an analysis of the changes in net financing revenue and other interest income, volume, and rate.

Year ended December 31, ($ in millions)

Volume

Yield/rate

Total

Volume

Yield/rate

Total

2017 vs. 2016
Increase (decrease) due to (a)

2016 vs. 2015
(Decrease) increase due to (a)

Assets

Interest-bearing cash and cash equivalents

Investment securities

Loans held-for-sale, net

Finance receivables and loans, net

Investment in operating leases, net

Other earning assets

Total interest-earning assets

Liabilities

102

—

269

(273)

—

Interest-bearing deposit liabilities

162

Short-term borrowings

Long-term debt

Total interest-bearing liabilities

Net financing revenue and other interest

income

(315)

—

388

(46)

226

(2) $

157

—

657

(319)

542

(40)

388

(272)

—

204

—

247

121

(9) $

(89)

228

314

(1)

(159)

239

(40)

592

(207)

388

112

200

188

(a) Changes in interest not solely due to volume or yield/rate are allocated in proportion to the absolute dollar amount of change in volume and yield/rate.

Outstanding Finance Receivables and Loans

The following table presents the composition of our on-balance sheet finance receivables and loans.

December 31, ($ in millions)

Consumer

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial loans

Total finance receivables and loans

Loans held-for-sale

2017

2016

2015

2014

2013

68,071

65,793

64,292

56,570

56,417

8,294

2,756

11,050

76,843

35,041

3,248

3,812

42,101

6,413

3,360

9,773

3,504

3,970

7,474

3,295

5,149

8,444

74,065

64,044

64,861

31,469

2,640

3,426

37,535

30,871

1,882

3,151

35,904

99,948

2,003

30,948

1,664

2,855

35,467

100,328

118,944

111,600

— $

105

11,657

2,093

13,750

81,821

33,025

3,887

4,160

41,072

122,893

108

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Nonperforming Assets

The following table summarizes the nonperforming assets in our on-balance sheet portfolio.

December 31, ($ in millions)

Consumer

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer (a)

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial (b)

2017

2016

2015

2014

2013

603

598

475

386

329

117

720

792

140

942

697

122

819

135

967

113

128

603

680

122

812

— $

158

177

563

645

745

185

192

521

116

204

725

101

836

Total nonperforming finance receivables and loans

Foreclosed properties

Repossessed assets (c)

Total nonperforming assets

Loans held-for-sale

(a)

(b)

Interest revenue that would have been accrued on total consumer finance receivables and loans at original contractual rates was $59 million during the
year ended December 31, 2017. Interest income recorded for these loans was $25 million during the year ended December 31, 2017.
Interest revenue that would have been accrued on total commercial finance receivables and loans at original contractual rates was $14 million during the
year ended December 31, 2017. Interest income recorded for these loans was $11 million during the year ended December 31, 2017.

(c) Repossessed assets exclude $9 million, $8 million, $8 million, $7 million, and $7 million of repossessed operating lease assets at December 31, 2017,

2016, 2015, 2014, and 2013, respectively.

Accruing Finance Receivables and Loans Past Due 90 Days or More

We had no consumer or commercial on-balance sheet accruing finance receivables and loans or loans held-for-sale past due 90 days or

more as to principal and interest as of December 31, 2017, 2016, 2015, and 2014, and $1 million as of December 31, 2013, which was
included in our legacy mortgage portfolio.

Allowance for Loan Losses

The following table presents an analysis of the activity in the allowance for loan losses on finance receivables and loans.

($ in millions)

Balance at January 1,

Charge-offs (a)

Recoveries

Net charge-offs

Provision for loan losses

Other (b)

Balance at December 31,

2017

2016

2015

2014

2013

1,144

1,054

977

1,208

1,170

(1,392)

382

(1,010)

1,148

(6)

(1,142)

341

(801)

917

(26)

(892)

283

(609)

707

(21)

(776)

239

(537)

457

(151)

(737)

265

(472)

501

1,276

1,144

1,054

977

1,208

(a) Represents the amount of the gross carrying value directly written-off. For consumer and commercial loans, the loss from a charge-off is measured as the

(b) Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

Management’s Discussion and Analysis

Ally Financial Inc. • Form 10-K

Allowance for Loan Losses by Type

The following table summarizes the allocation of the allowance for loan losses by product type.

December 31, ($ in millions)

Amount

% of
total

Amount

% of
total

Amount

% of
total

Amount

% of
total

Amount

% of
total

2017

2016

2015

2014

2013

Consumer

Consumer automotive

1,066

83.5

932

81.4

834

79.1

685

70.1

673

55.7

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

1.5

4.7

6.2

1.0

7.0

8.0

Total consumer loans

1,145

89.7

1,023

89.4

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial loans

2.9

5.4

2.0

2.8

5.6

2.2

114

948

1.5

9.3

10.8

89.9

2.8

5.0

2.3

142

152

837

140

977

1.0

14.6

15.6

85.7

6.7

4.2

3.4

14.3

379

389

1,062

0.8

31.4

32.2

87.9

5.6

4.1

2.4

146

12.1

100.0

1,208

100.0

Total allowance for loan losses

1,276

100.0

1,144

100.0

1,054

100.0

131

10.3

121

10.6

106

10.1

Deposit Liabilities

The following table presents the average balances and interest rates paid for types of domestic deposits.

Year ended December 31, ($ in millions)

Domestic deposits

Noninterest-bearing deposits

Interest-bearing deposits

2017

2016

2015

Average
balance (a)

Average
deposit rate

Average
balance (a)

Average
deposit rate

Average
balance (a)

Average
deposit rate

101

—% $

—%

Savings and money market checking accounts

Certificates of deposit

Dealer deposits

50,204

36,375

Total domestic deposit liabilities

86,732

1.07

1.47

5.09

1.24

42,040

30,275

200

72,609

0.96

1.39

4.16

1.14

31,608

30,212

266

62,171

0.91

1.39

3.73

1.15

(a) Average balances are calculated using a combination of monthly and daily average methodologies.

The following table presents the amount of certificates of deposit in denominations of $100 thousand or more and $250 thousand or

more, segregated by time remaining until maturity.

December 31, 2017 ($ in millions)

Three months
or less

Over three months
through
six months

Over six months
through
twelve months

Over
twelve months

Total

Certificates of deposit ($100,000 or more)

1,687

3,371

9,299

4,567

$ 18,924

Certificates of deposit ($250,000 or more)

508

867

2,639

1,310

5,324

Quantitative and Qualitative Disclosures about Market Risk

Ally Financial Inc. • Form 10-K

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Refer to the Market Risk section of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Report on Internal Control over Financial Reporting

Ally Financial Inc. • Form 10-K

Item 8. Financial Statements and Supplementary Data

Ally management is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s
internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief
Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial
statements in accordance with generally accepted accounting principles.

The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Consolidated Financial
Statements.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent

or detect misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, an evaluation of

the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the
“COSO” criteria.

Based on the assessment performed, management concluded that at December 31, 2017, Ally’s internal control over financial reporting

was effective based on the COSO criteria.

The independent registered public accounting firm, Deloitte & Touche LLP, has audited the Consolidated Financial Statements of Ally

and has issued an attestation report on our internal control over financial reporting at December 31, 2017, as stated in its report, which is
included herein.

/S/ JEFFREY J. BROWN

Jeffrey J. Brown

Chief Executive Officer

February 21, 2018

/S/ CHRISTOPHER A. HALMY

Christopher A. Halmy

Chief Financial Officer

February 21, 2018

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Ally Financial Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ally Financial Inc. and subsidiaries (the “Company”) as of December

31, 2017 and 2016, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the
three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and
2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity
with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),

the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 21, 2018, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.

/S/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Detroit, Michigan

February 21, 2018

We have served as the Company’s auditor since at least 1936; however, an earlier year could not be reliably determined.

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Ally Financial Inc.:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Ally Financial Inc. and subsidiaries (the “Company”) as of December 31,
2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by
COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),

the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated February 21,
2018, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of

financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

/S/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Detroit, Michigan

February 21, 2018

Consolidated Statement of Income

Ally Financial Inc. • Form 10-K

Year ended December 31, ($ in millions)

Financing revenue and other interest income

Interest and fees on finance receivables and loans

Interest on loans held-for-sale

Interest and dividends on investment securities and other earning assets

Interest on cash and cash equivalents

Operating leases

Total financing revenue and other interest income

Interest expense

Interest on deposits

Interest on short-term borrowings

Interest on long-term debt

Total interest expense

Net depreciation expense on operating lease assets

Net financing revenue and other interest income

Other revenue

Insurance premiums and service revenue earned

Gain on mortgage and automotive loans, net

Loss on extinguishment of debt

Other gain on investments, net

Other income, net of losses

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Insurance losses and loss adjustment expenses

Other operating expenses

Total noninterest expense

Income from continuing operations before income tax expense

Income tax expense from continuing operations

Net income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Statement continues on the next page.

The Notes to the Consolidated Financial Statements are an integral part of these statements.

2017

2016

2015

5,819

5,162

4,570

—

599

1,867

8,322

1,077

127

1,653

2,857

1,244

4,221

973

(7)

102

408

1,544

5,765

1,148

1,095

332

1,683

3,110

1,507

581

926

—

418

2,711

8,305

830

1,742

2,629

1,769

3,907

945

(5)

185

394

1,530

5,437

917

992

342

1,605

2,939

1,581

470

1,111

(44)

381

3,398

8,397

718

1,662

2,429

2,249

3,719

940

(357)

155

359

1,142

4,861

707

963

293

1,505

2,761

1,393

496

897

392

929

1,067

1,289

Consolidated Statement of Income

Ally Financial Inc. • Form 10-K

Year ended December 31, (in dollars) (a)

Basic earnings per common share

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Diluted earnings per common share

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Cash dividends declared per common share

2017

2016

2015

2.04

0.01

2.05

2.03

0.01

2.04

0.40

2.25

(0.09)

2.15

2.24

(0.09)

2.15

0.16

(3.47)

0.81

(2.66)

(3.47)

0.81

(2.66)

—

(a) Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.

Refer to Note 20 for additional earnings per share information, including the impact of preferred stock dividends recognized in connection
with the redemption of the Series G Preferred Stock and the repurchases of the Series A Preferred Stock in 2015. The Notes to the
Consolidated Financial Statements are an integral part of these statements.

Consolidated Statement of Comprehensive Income

Ally Financial Inc. • Form 10-K

Year ended December 31, ($ in millions)

Net income

Other comprehensive income (loss), net of tax

Investment securities

Net unrealized gains (losses) arising during the period

Less: Net realized gains reclassified to net income

Net change

Translation adjustments

Net unrealized gains (losses) arising during the period

Less: Net realized (losses) gains reclassified to net income

Net change

Net investment hedges

Net unrealized (losses) gains arising during the period

Less: Net realized losses reclassified to net income

Net change

Translation adjustments and net investment hedges, net change

Cash flow hedges

Net unrealized gains arising during the period

Defined benefit pension plans

Net unrealized gains (losses) arising during the period

Less: Net realized (losses) gains reclassified to net income

Net change

Other comprehensive income (loss), net of tax

Comprehensive income

The Notes to the Consolidated Financial Statements are an integral part of these statements.

2017

2016

2015

929

1,067

1,289

192

100

—

(6)

—

(6)

—

106

147

(114)

(1)

—

(3)

(2)

(1)

(39)

(138)

(26)

(48)

(3)

(27)

—

(1)

(110)

(165)

1,035

957

1,124

Consolidated Balance Sheet

Ally Financial Inc. • Form 10-K

December 31, ($ in millions, except share data)

2017

2016

Assets

Cash and cash equivalents

Noninterest-bearing

Interest-bearing

Total cash and cash equivalents

Available-for-sale securities (refer to Note 8 for discussion of investment securities pledged as collateral)

Held-to-maturity securities (fair value of $1,865 and $789)

Loans held-for-sale, net

Finance receivables and loans, net

Finance receivables and loans, net of unearned income

Allowance for loan losses

Total finance receivables and loans, net

Investment in operating leases, net

Premiums receivable and other insurance assets

Other assets

Total assets

Liabilities

Deposit liabilities

Noninterest-bearing

Interest-bearing

Total deposit liabilities

Short-term borrowings

Long-term debt

Interest payable

Unearned insurance premiums and service revenue

Accrued expenses and other liabilities

Total liabilities

Commitments and contingencies (refer to Note 29 and Note 30)

Equity

Common stock and paid-in capital ($0.01 par value, shares authorized 1,100,000,000; issued 489,883,553 and

485,707,644; and outstanding 437,053,936 and 467,000,306)

Accumulated deficit

Accumulated other comprehensive loss

Treasury stock, at cost (52,829,617 and 18,707,338 shares)

Total equity

Total liabilities and equity

The Notes to the Consolidated Financial Statements are an integral part of these statements.

844

3,408

4,252

22,821

1,899

108

1,547

4,387

5,934

18,926

839

—

122,893

118,944

(1,276)

121,617

8,741

2,047

5,663

(1,144)

117,800

11,470

1,905

6,854

167,148

163,728

108

93,148

93,256

11,413

44,226

375

2,604

1,780

78,938

79,022

12,673

54,128

351

2,500

1,737

153,654

150,411

21,245

(6,406)

(235)

(1,110)

13,494

21,166

(7,151)

(341)

(357)

13,317

167,148

163,728

Consolidated Balance Sheet

Ally Financial Inc. • Form 10-K

The assets of consolidated variable interest entities, presented based upon the legal transfer of the underlying assets in order to reflect

legal ownership, that can be used only to settle obligations of the consolidated variable interest entities and the liabilities of these entities for
which creditors (or beneficial interest holders) do not have recourse to our general credit were as follows.

December 31, ($ in millions)

Assets

Finance receivables and loans, net

2017

2016

Finance receivables and loans, net of unearned income

20,623

24,630

Allowance for loan losses

Total finance receivables and loans, net

Investment in operating leases, net

Other assets

Total assets

Liabilities

Long-term debt

Accrued expenses and other liabilities

Total liabilities

The Notes to the Consolidated Financial Statements are an integral part of these statements.

(136)

20,487

444

689

21,620

10,197

10,206

(173)

24,457

1,745

1,390

27,592

13,259

13,271

100

Consolidated Statement of Changes in Equity

Ally Financial Inc. • Form 10-K

($ in millions)

Common
stock and
paid-in
capital

Preferred
stock

Accumulated
deficit

Balance at January 1, 2015

21,038

1,255

Net income

Preferred stock dividends

Series A preferred stock repurchase

Series G preferred stock redemption

Share-based compensation

Other comprehensive loss

Share repurchases related to employee stock-
based compensation awards

(325)

(234)

Balance at December 31, 2015

21,100

696

Net income

Preferred stock dividends

(6,828)

1,289

(2,571) (a)

(8,110)

1,067

(30)

Series A preferred stock redemption

(696)

Share-based compensation

Other comprehensive loss

Common stock repurchases (b)

Common stock dividends ($0.16 per share)

(78)

Accumulated
other
comprehensive
loss

Treasury
stock

Total
equity

(66) $

— $ 15,399

1,289

(2,571)

(325)

(234)

(165)

(231) $

(16) $ 13,439

(16)

1,067

(30)

(696)

(110)

(341)

(78)

(110)

(341)

Balance at December 31, 2016

21,166

— $

(7,151)

(341) $

(357) $ 13,317

Net income

Share-based compensation

Other comprehensive income

Common stock repurchases (b)

Common stock dividends ($0.40 per share)

929

(184)

106

(753)

929

106

(753)

(184)

Balance at December 31, 2017

21,245

— $

(6,406)

(235) $

(1,110) $ 13,494

(a) Preferred stock dividends include $2,364 million recognized in connection with the partial redemption of the Series G Preferred Stock and the repurchase
of the Series A Preferred Stock. These dividends represent an additional return to preferred stockholders calculated as the excess consideration paid over
the carrying amount derecognized.
Includes shares repurchased related to employee stock-based compensation awards.

(b)

The Notes to the Consolidated Financial Statements are an integral part of these statements.

101

Consolidated Statement of Cash Flows

Ally Financial Inc. • Form 10-K

Year ended December 31, ($ in millions)

2017

2016

2015

Operating activities

Net income

Reconciliation of net income to net cash provided by operating activities

929

1,067

1,289

Depreciation and amortization

Provision for loan losses

Gain on mortgage and automotive loans, net

Other gain on investments, net

Loss on extinguishment of debt

Originations and purchases of loans held-for-sale

Proceeds from sales and repayments of loans held-for-sale

(Gain) loss on sale of subsidiaries, net

Net change in

Deferred income taxes

Interest payable

Other assets

Other liabilities

Other, net

Net cash provided by operating activities

Investing activities

Purchases of available-for-sale securities

Proceeds from sales of available-for-sale securities

Proceeds from repayments of available-for-sale securities

Purchases of held-to-maturity securities

Proceeds from repayments of held-to-maturity securities

Purchases of finance receivables and loans held-for-investment

Proceeds from sales of finance receivables and loans initially held-for-investment

Originations and repayments of finance receivables and loans held-for-investment and other,

net

Purchases of operating lease assets

Disposals of operating lease assets

Acquisitions, net of cash acquired

Proceeds from sale of business unit, net (a)

Net change in nonmarketable equity investments

Other, net

Net cash used in investing activities

Statement continues on the next page.

The Notes to the Consolidated Financial Statements are an integral part of these statements.

1,859

1,148

(68)

(102)

(414)

310

—

534

(153)

(69)

2,382

2,801

917

(11)

(185)

(141)

240

—

458

(120)

(206)

160

707

(45)

(155)

357

(1,770)

1,658

(452)

565

(127)

526

(247)

4,079

4,567

5,111

(11,234)

(16,031)

(12,250)

4,633

2,899

(1,026)

(5,452)

1,339

(1,063)

(4,052)

5,567

—

(187)

(219)

11,036

3,379

(841)

—

(3,859)

4,285

(8,826)

(3,274)

6,304

(309)

—

(628)

(306)

6,874

4,255

—

(4,501)

3,197

(9,344)

(4,685)

5,546

—

1,049

(147)

(8,727)

(9,070)

(10,003)

102

Consolidated Statement of Cash Flows

Ally Financial Inc. • Form 10-K

Year ended December 31, ($ in millions)

Financing activities

Net change in short-term borrowings

Net increase in deposits

Proceeds from issuance of long-term debt

Repayments of long-term debt

Repurchase and redemption of preferred stock

Repurchase of common stock

Dividends paid

Net cash provided by financing activities

Effect of exchange-rate changes on cash and cash equivalents and restricted cash

Net (decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of year

Cash and cash equivalents and restricted cash at end of year

Supplemental disclosures

Cash paid for

Interest

Income taxes

Noncash items

Held-to-maturity securities received in consideration for loans sold

2017

2016

2015

(1,263)

14,172

17,969

4,564

12,508

14,155

(27,908)

(26,412)

—

(753)

(184)

2,033

(2,612)

7,881

(696)

(341)

(108)

3,670

(832)

8,713

5,269

7,881

1,028

8,247

30,665

(31,350)

(559)

(16)

(2,571)

5,444

(4)

548

8,165

8,713

2,829

2,647

2,632

—

Finance receivables and loans transferred to loans held-for-sale

1,339

4,282

1,311

Other disclosures

Proceeds from repayments of mortgage loans held-for-investment originally designated as

held-for-sale

(a) Cash flows of discontinued operations are reflected within operating, investing, and financing activities in the Consolidated Statement of Cash Flows.

The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Consolidated Balance Sheet to the

Consolidated Statement of Cash Flows.

December 31, ($ in millions)

Cash and cash equivalents as disclosed on the Consolidated Balance Sheet

Restricted cash included in other assets on the Consolidated Balance Sheet (a)

Total cash and cash equivalents and restricted cash as disclosed in the Consolidated Statement of Cash Flows

2017

2016

4,252

1,017

5,269

5,934

1,947

7,881

(a) Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 14 for additional details describing the nature of restricted

cash balances.

The Notes to the Consolidated Financial Statements are an integral part of these statements.

103

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

1. Description of Business, Basis of Presentation, and Significant Accounting Policies

Ally Financial Inc. (together with its consolidated subsidiaries unless the context requires otherwise, Ally, the Company, or we, us, or

our) is a leading digital financial services company and top 25 U.S. financial holding company (FHC) based on total assets, offering
diversified financial products and services for consumers, businesses, automotive dealers, and corporate clients. Ally operates with a
distinctive brand, an innovative approach, and a relentless focus on our customers. We are a Delaware corporation and are registered as a bank
holding company (BHC) under the Bank Holding Company Act of 1956 as amended and an FHC under the Gramm-Leach-Bliley Act of 1999
as amended. We are one of the largest full service automotive finance operations in the country with a legacy that dates back to 1919, a deep
expertise in automotive lending, and a complementary automotive-focused insurance business. Our wholly-owned banking subsidiary, Ally
Bank, has received numerous industry awards for its services and capabilities and is one of the largest and most respected online banks,
uniquely positioned for the observed shifting trends in consumer banking preferences for digital banking. We offer mortgage lending services
and a variety of deposit and other banking products, including CDs, online savings, money market and checking accounts, and IRA products.
We also promote a cash back credit card. We have recently integrated a growing digital wealth management and online brokerage platform to
enable consumers to have a variety of options in managing their savings and wealth. Additionally, through our corporate finance business, we
primarily offer senior secured leveraged cash flow and asset-based loans to middle-market companies.

Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of the parent and its consolidated subsidiaries, of which it is deemed to
possess control, after eliminating intercompany balances and transactions, and include all variable interest entities (VIEs) in which we are the
primary beneficiary. Other entities in which we have invested and have the ability to exercise significant influence over operating and
financial policies of the investee, but upon which we do not possess control, are accounted for by the equity method of accounting within the
financial statements and they are therefore not consolidated. Refer to Note 11 for further details on our VIEs. Our accounting and reporting
policies conform to accounting principles generally accepted in the United States of America (GAAP). Additionally, where applicable, the
policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Certain reclassifications may have been
made to the prior periods’ financial statements and notes to conform to the current period’s presentation, which did not have a material impact
on our Consolidated Financial Statements.

In the past, we have operated our international subsidiaries in a similar manner as we operate in the United States of America

(U.S. or United States), subject to local laws or other circumstances that may cause us to modify our procedures accordingly. The financial
statements of subsidiaries that operate outside of the United States generally are measured using the local currency as the functional currency.
All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates. The resulting translation
adjustments are recorded in accumulated other comprehensive income until the foreign subsidiaries are sold or substantially liquidated at
which point the accumulated translation adjustments are recognized directly in earnings as part of the gain or loss on sale or liquidation.
Income and expense items are translated at average exchange rates prevailing during the reporting period. The majority of our international
operations have ceased and are included in discontinued operations as further described in Note 3.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and that
affect income and expenses during the reporting period and related disclosures. In developing the estimates and assumptions, management
uses all available evidence; however, actual results could differ because of uncertainties associated with estimating the amounts, timing, and
likelihood of possible outcomes. Our most significant estimates pertain to the allowance for loan losses, valuations of automotive lease assets
and residuals, fair value of financial instruments, legal and regulatory reserves, and the determination of the provision for income taxes.

Significant Accounting Policies
Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash on deposit at other financial institutions, cash items in process of collection, and

certain highly liquid investments with original maturities of three months or less from the date of purchase. The book value of cash
equivalents approximates fair value because of the short maturities of these instruments and the insignificant risk they present to changes in
value with respect to changes in interest rates. Certain securities with original maturities of three months or less from the date of purchase that
are held as a portion of longer-term investment portfolios, primarily held by our Insurance operations, are classified as investment securities.
Cash and cash equivalents with legal restrictions limiting our ability to withdraw and use the funds are considered restricted cash and
restricted cash equivalents and are presented as other assets on our Consolidated Balance Sheet.

Investments

Our portfolio of investments includes various debt and marketable equity securities and nonmarketable equity investments. Debt and
marketable equity securities are classified based on management’s intent to sell or hold the security. We classify debt securities as held-to-
maturity only when we have both the intent and ability to hold the securities to maturity. We classify debt and marketable equity securities as
trading when the securities are acquired for the purpose of selling or holding them for a short period of time. Securities not classified as either
held-to-maturity or trading are classified as available-for-sale.

104

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Our debt and marketable equity securities include government securities, corporate bonds, asset-backed securities (ABS), mortgage-
backed securities (MBS), and equity securities. Our portfolio includes securities classified as available-for-sale and held-to-maturity. Our
available-for-sale securities are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income or
loss and are subject to impairment. Our held-to-maturity securities are carried at amortized cost and are subject to impairment.

We amortize premiums and discounts on debt securities as an adjustment to investment yield generally over the stated maturity of the

security. For ABS and MBS where prepayments can be reasonably estimated, amortization is adjusted for expected prepayments.

Additionally, we assess our debt and marketable equity securities for potential other-than-temporary impairment. We employ a
methodology that considers available evidence in evaluating potential other-than-temporary impairment of our debt and marketable equity
securities classified as available-for-sale and held-to-maturity. If the cost of an investment exceeds its fair value, we evaluate, among other
factors, the magnitude and duration of the decline in fair value. We also evaluate the financial health of and business outlook for the issuer, the
performance of the underlying assets for interests in securitized assets, and, for securities classified as available-for-sale, our intent and ability
to hold the investment through recovery of its amortized cost basis.

Once a decline in fair value of a debt security is determined to be other-than-temporary, an impairment charge for the credit component

is recorded to other gain (loss) on investments, net, in our Consolidated Statement of Income, and a new cost basis in the investment is
established. The noncredit loss component of an available-for-sale debt security is recorded in other comprehensive income (loss) when we do
not intend to sell the security and it is not more likely than not that we will have to sell the security prior to the security’s anticipated recovery.
Both, the credit and noncredit loss components are recorded in earnings when we intend to sell the security or it is more likely than not that
we will have to sell the security prior to the security’s anticipated recovery. Unrealized losses that we have determined to be other-than-
temporary on equity securities are recorded to other gain (loss) on investments, net in our Consolidated Statement of Income. Subsequent
increases and decreases to the fair value of available-for-sale debt and equity securities are included in other comprehensive income (loss), so
long as they are not attributable to another other-than-temporary impairment.

Realized gains and losses on investment securities are reported in other gain (loss) on investments, net, and are determined using the

specific identification method. For information on our debt and marketable equity securities, refer to Note 8.

In addition to our investments in debt and marketable equity securities, we hold equity positions in other entities. These positions include
Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock held to meet regulatory requirements, other equity investments that
are not publicly traded and do not have a readily determinable fair value, equity investments in low income housing tax credits, and
Community Reinvestment Act (CRA) equity investments, which are also not publicly traded and do not have a readily determinable fair
value. Our investments in FHLB and FRB stock and other equity investments are accounted for using the cost method of accounting. Our low
income housing tax credit investments are accounted for using the proportional amortization method of accounting for qualified affordable
housing investments. Our obligations related to unfunded commitments for our low income housing tax credit investments are reported in
other liabilities. Our CRA investments are accounted for using the equity method of accounting. Our FHLB and FRB stock and other equity
investments carried at cost are included in nonmarketable equity investments in other assets. Our investments in low income housing tax
credits and CRA are also included in other assets. As conditions warrant, we review our investments for impairment and will adjust the
carrying value of the investment if it is deemed to be impaired. No impairment was recognized in 2017 or 2016. For more information on our
nonmarketable equity investments, refer to Note 25.

Finance Receivables and Loans

We initially classify finance receivables and loans as either loans held-for-sale or loans held-for-investment based on management’s
assessment of our intent and ability to hold the loans for the foreseeable future or until maturity. Management’s view of the foreseeable future
is based on the longest reasonably reliable net income, liquidity, and capital forecast period. Management’s intent and ability with respect to
certain loans may change from time to time depending on a number of factors, for example economic, liquidity, and capital conditions. In
order to reclassify loans to held-for-sale, management must have the intent to sell the loans and reasonably identify the specific loans to be
sold.

Loans classified as held-for-sale are presented as loans held-for-sale, net on our Consolidated Balance Sheet and are carried at the lower

of their net carrying value or fair value, unless the fair value option was elected, in which case those loans are carried at fair value. We’ve
elected the fair value option for conforming direct-to-consumer originations for which we have a commitment to sell. The interest rate lock
commitment that we enter into for a loan originated as held-for-sale and certain forward commitments to sell the loan are considered
derivative instruments, which are carried at fair value on our Consolidate Balance Sheet. We have elected the fair value option to measure our
non-derivative forward commitments. Changes in the fair value of our interest rate lock commitments, derivative forward commitments, and
non-derivative forward commitments, as well as changes in the carrying value of loans classified as held-for-sale, are reported through gain
on mortgage and automotive loans, net in our Consolidated Statement of Comprehensive Income. Interest income on our loans classified as
held-for-sale is recognized based upon the contractual rate of interest on the loan and the unpaid principal balance. We report accrued interest
receivable on our loans classified as held-for-sale in other assets on the Consolidated Balance Sheet.

Loans classified as held-for-investment are presented as finance receivables and loans, net on our Consolidated Balance Sheet. Finance

receivables and loans are reported at their gross carrying value, which includes the principal amount outstanding, net of unamortized deferred
fees and costs on originated loans, unamortized premiums and discounts on purchased loans, unamortized basis adjustments arising from the
designation of finance receivables and loans as the hedged item in qualifying fair value hedge relationships, and cumulative principal charge-

105

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

offs. We refer to the gross carrying value less the allowance for loan loss as the net carrying value in finance receivables and loans. Unearned
rate support received from an automotive manufacturer on certain automotive loans, deferred origination fees and costs, and premiums and
discounts on purchased loans, are amortized over the contractual life of the related finance receivable or loan using the effective interest
method. We make various incentive payments for consumer automotive loan originations to automotive dealers and account for these
payments as direct loan origination costs. Additionally, we make incentive payments to certain commercial automobile wholesale borrowers
and account for these payments as a reduction to interest income in the period they are earned. Interest income on our finance receivables and
loans is recognized based on the contractual rate of interest plus the amortization of deferred amounts using the effective interest method. We
report accrued interest receivable on our finance receivables and loans in other assets on our Consolidated Balance Sheet. Loan commitment
fees are generally deferred and amortized over the commitment period. For information on finance receivables and loans, refer to Note 9.

Our portfolio segments are based on the level at which we develop and document our methodology for determining the allowance for
loan losses. Additionally, the classes of finance receivables are based on several factors including the method for monitoring and assessing
credit risk, the method of measuring carrying value, and the risk characteristics of the finance receivable. Based on an evaluation of our
process for developing the allowance for loan losses including the nature and extent of exposure to credit risk arising from finance
receivables, we have determined our portfolio segments to be consumer automotive, consumer mortgage, and commercial.

•

Consumer automotive — Consists of retail automotive financing for new and used vehicles.

Consumer mortgage — Consists of the following classes of finance receivables.

• Mortgage Finance — Consists of consumer first mortgages from our ongoing mortgage operations including bulk

acquisitions, direct-to-consumer originations, and refinancing of high-quality jumbo mortgages and low-to-moderate
income (LMI) mortgages.

• Mortgage — Legacy — Consists of consumer mortgage assets originated prior to January 1, 2009, including first

mortgages, subordinate-lien mortgages, and home equity mortgages.

•

Commercial — Consists of the following classes of finance receivables.

•

Commercial and Industrial

•

Automotive — Consists of financing operations to fund dealer purchases of new and used vehicles through
wholesale floorplan financing. Additional commercial offerings include automotive dealer term loans, dealer
fleet financing, and other equipment financing.

• Other — Consists primarily of senior secured leveraged cash flow and asset-based loans related to our

Corporate Finance business.

•

Commercial Real Estate — Consists of term loans to finance dealership land and buildings, and other commercial lending
secured by real estate.

Nonaccrual Loans

Generally, we recognize loans of all classes as past due when they are 30 days delinquent on making a contractually required payment,
and loans are placed on nonaccrual status when principal or interest has been delinquent for 90 days or when full collection is not expected.
Interest income recognition is suspended when finance receivables and loans are placed on nonaccrual status. Additionally, amortization of
premiums and discounts and deferred fees and costs ceases when finance receivables and loans are placed on nonaccrual. Exceptions include
commercial real estate loans that are placed on nonaccrual status when delinquent for 60 days or when full collection is not probable, if
sooner. Additionally, our policy is to generally place all loans that have been modified in troubled debt restructurings (TDRs) on nonaccrual
status until the loan has been brought fully current, the collection of contractual principal and interest is reasonably assured, and six
consecutive months of repayment performance is achieved. In certain cases, if a borrower has been current up to the time of the modification
and repayment of the debt subsequent to the modification is reasonably assured, we may choose to continue to accrue interest on the loan.

Loans on nonaccrual status are reported as nonperforming loans in Note 9. The receivable for interest income that is accrued, but not

collected, at the date finance receivables and loans are placed on nonaccrual status is reversed against interest income and subsequently
recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, where there is doubt regarding the
ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Generally, finance receivables
and loans are restored to accrual status only when contractually current and the collection of future payments is reasonably assured.

Impaired Loans

Loans of all classes are considered impaired when we determine it is probable that we will be unable to collect all amounts due (both

principal and interest) according to the terms of the loan agreement.

For all classes of consumer loans, impaired loans include all loans that have been modified in TDRs.

Commercial loans of all classes are considered impaired on an individual basis and reported as impaired when we determine it is

probable that we will be unable to collect all amounts due according to the terms of the loan agreement.

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With the exception of certain consumer TDRs that have been returned to accruing status, for all classes of impaired loans, income
recognition is consistent with that of nonaccrual loans discussed above. Impaired loans may return to accrual status as discussed in the
preceding nonaccrual loan section at which time, the normal accrual of interest income resumes. For collateral dependent loans, if the
recorded investment in the impaired loans exceeds the fair value of the collateral, a charge-off is recorded consistent with the TDR discussion
below.

Troubled Debt Restructurings

When the terms of finance receivables or loans are modified, consideration must be given as to whether or not the modification results in
a TDR. A modification is considered to be a TDR when both the borrower is experiencing financial difficulty and we grant a concession to the
borrower. These considerations require significant judgment and vary by portfolio segment. In all cases, the cumulative impacts of all
modifications are considered at the time of the most recent modification.

For consumer loans of all classes, various qualitative factors are utilized for assessing the financial difficulty of the borrower. These
include, but are not limited to, the borrower’s default status on any of its debts, bankruptcy and recent changes in financial circumstances (loss
of job, etc.). A concession has been granted when as a result of the modification we do not expect to collect all amounts due under the original
loan terms, including interest accrued at the original contract rate. Types of modifications that may be considered concessions include, but are
not limited to, extensions of terms at a rate that does not constitute a market rate, a reduction, deferral or forgiveness of principal or interest
owed and loans that have been discharged in a Chapter 7 Bankruptcy and have not been reaffirmed by the borrower.

In addition to the modifications noted above, in our consumer automotive portfolio segment of loans we also provide extensions or
deferrals of payments to borrowers whom we deem to be experiencing only temporary financial difficulty. In these cases, there are limits
within our operational policies to minimize the number of times a loan can be extended, as well as limits to the length of each extension,
including a cumulative cap over the life of the loan. If these limits are breached, the modification is considered a TDR as noted in the
following paragraph. Before offering an extension or deferral, we evaluate the capacity of the customer to make the scheduled payments after
the deferral period. During the deferral period, we continue to accrue and collect interest on the loan as part of the deferral agreement. We
grant these extensions or deferrals when we expect to collect all amounts due including interest accrued at the original contract rate.

A restructuring that results in only a delay in payment that is deemed to be insignificant is not a concession and the modification is not
considered to be a TDR. In order to assess whether a restructuring that results in a delay in payment is insignificant, we consider the amount
of the restructured payments subject to delay in conjunction with the unpaid principal balance or the collateral value of the loan, whether or
not the delay is significant with respect to the frequency of payments under the original contract, or the loan’s original expected duration. In
the cases where payment extensions on our automotive loan portfolio cumulatively extend beyond 90 days and are more than 10% of the
original contractual term or where the cumulative payment extension is beyond 180 days, we deem the delay in payment to be more than
insignificant, and as such, classify these types of modifications as TDRs. Otherwise, we believe that the modifications do not represent a
concessionary modification and accordingly, they are not classified as TDRs.

For commercial loans of all classes, similar qualitative factors are considered when assessing the financial difficulty of the borrower. In
addition to the factors noted above, consideration is also given to the borrower’s forecasted ability to service the debt in accordance with the
contractual terms, possible regulatory actions and other potential business disruptions (e.g., the loss of a significant customer or other revenue
stream). Consideration of a concession is also similar for commercial loans. In addition to the factors noted above, consideration is also given
to whether additional guarantees or collateral have been provided.

For all loans, TDR classification typically results from our loss mitigation activities. For loans held-for-investment that are not carried at

fair value and are TDRs, impairment is typically measured based on the difference between the gross carrying value of the loan and the
present value of the expected future cash flows of the loan. The loan may also be measured for impairment based on the fair value of the
underlying collateral less costs to sell for loans that are collateral dependent. We recognize impairment by either establishing a valuation
allowance or recording a charge-off.

The financial impacts of modifications that meet the definition of a TDR are reported in the period in which they are identified as TDRs.

Additionally, if a loan that is classified as a TDR redefaults within twelve months of the modification, we are required to disclose the
instances of redefault. For the purpose of this disclosure, we have determined that a loan is considered to have redefaulted when the loan
meets the requirements for evaluation under our charge-off policy except for commercial loans where redefault is defined as 90 days past due.
Impaired loans may return to accrual status as discussed in the preceding nonaccrual loan section at which time, the normal accrual of interest
income resumes.

Net Charge-offs

We disclose the measurement of net charge-offs as the amount of gross charge-offs recognized less recoveries received. Gross charge-
offs reflect the amount of the gross carry value directly written-off. Generally, we recognize recoveries when they are received and record
them as an increase to the allowance for loan losses. As a general rule, consumer automotive loans are written down to estimated collateral
value, less costs to sell, once a loan becomes 120 days past due. In our consumer mortgage portfolio segment, first-lien mortgages and a
subset of our home equity portfolio that are secured by real estate in a first-lien position are written down to the estimated fair value of the
collateral, less costs to sell, once a mortgage loan becomes 180 days past due. Consumer mortgage loans that represent second-lien positions
are charged off at 180 days past due. Consumer mortgage loans within our second-lien portfolio in bankruptcy that are 60 days past due are
fully charged off within 60 days of receipt of notification of filing from the bankruptcy court. Consumer automotive and first-lien consumer

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mortgage loans in bankruptcy that are 60 days past due are written down to their expected future cash flows, which is generally fair value of
the collateral, less costs to sell, within 60 days of receipt of notification of filing from the bankruptcy court. Regardless of other timelines
noted within this policy, loans are considered collateral dependent once foreclosure or repossession proceedings begin and are charged-off to
the estimated fair value of the underlying collateral, less costs to sell at that time.

Commercial loans are individually evaluated and where collectability of the recorded balance is in doubt are written down to the

estimated fair value of the collateral less costs to sell. Generally, all commercial loans are charged-off when it becomes unlikely that the
borrower is willing or able to repay the remaining balance of the loan and any underlying collateral is not sufficient to recover the outstanding
principal. Collateral dependent loans are charged-off to the fair market value of collateral less costs to sell when appropriate. Noncollateral
dependent loans are fully written-off.

Allowance for Loan Losses

The allowance for loan losses (the allowance) is management’s estimate of incurred losses in the lending portfolios. We determine the

amount of the allowance required for each of our portfolio segments based on its relative risk characteristics. The evaluation of these factors
for both consumer and commercial finance receivables and loans involves quantitative analysis combined with sound management judgment.
Additions to the allowance are charged to current period earnings through the provision for loan losses; amounts determined to be
uncollectible are charged directly against the allowance, net of amounts recovered on previously charged-off accounts.

The allowance is composed of two components: specific reserves established for individual loans evaluated as impaired and portfolio-
level reserves established for large groups of typically smaller balance homogeneous loans that are collectively evaluated for impairment. We
evaluate the adequacy of the allowance based on the combined total of these two components. Determining the appropriateness of the
allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. It is possible that others,
given the same information, may at any point in time reach different reasonable conclusions.

Measurement of impairment for specific reserves is generally determined on a loan-by-loan basis. Loans determined to be specifically

impaired are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, an observable
market price, or the estimated fair value of the collateral less estimated costs to sell when appropriate, whichever is determined to be the most
appropriate. When these measurement values are lower than the net carrying value of that loan, impairment is recognized. Loans that are not
identified as individually impaired are pooled with other loans with similar risk characteristics for evaluation of impairment for the portfolio-
level allowance.

For the purpose of calculating portfolio-level reserves, we have grouped our loans into three portfolio segments: consumer automotive,
consumer mortgage, and commercial. The allowance consists of the combination of a quantitative assessment component based on statistical
models, a retrospective evaluation of actual loss information to loss forecasts, and includes a qualitative component based on management
judgment. Management takes into consideration relevant qualitative factors, including external and internal trends such as the impacts of
changes in underwriting standards, collections and account management effectiveness, geographic concentrations, and economic events,
among other factors, that have occurred but are not yet reflected in the quantitative assessment component. Qualitative adjustments are
documented, reviewed, and approved through our established risk governance processes and follow regulatory guidance.

Management also considers the need for a reserve on unfunded non-derivative loan commitments across our portfolio segments,
including lines of credit and standby letters of credit, using similar procedures and methodologies used to determine the allowance for loan
losses while also considering historical loss ratios and potential usage levels. The reserve for unfunded loan commitments is recorded within
other liabilities on our Consolidated Balance Sheet and the related expense is reported as other noninterest expense in our Consolidated
Statement of Comprehensive Income. Refer to Note 29 for information on our unfunded loan commitments.

During 2017, we did not substantively change any material aspect of our overall approach used to determine the allowance for loan

losses for our portfolio segments. There were no material changes in criteria or estimation techniques as compared to prior periods that
impacted the determination of the current period allowance for loan losses for our portfolio segments.

Refer to Note 9 for information on the allowance for loan losses.

Consumer Loans

Our consumer automotive and consumer mortgage portfolio segments are reviewed for impairment based on an analysis of loans that are
grouped into common risk categories. We perform periodic and systematic detailed reviews of our lending portfolios to identify inherent risks
and to assess the overall collectability of those portfolios. Loss models are utilized for these portfolios, which consider a variety of credit
quality indicators including, but not limited to, historical loss experience, current economic conditions, credit scores, and expected loss factors
by loan type.

Consumer Automotive Portfolio Segment

The allowance for loan losses within the consumer automotive portfolio segment is calculated using proprietary statistical models and

other risk indicators applied to pools of loans with similar risk characteristics, including credit bureau score and loan-to-value ratios to arrive
at an estimate of incurred losses in the portfolio. These statistical loss forecasting models are utilized to estimate incurred losses and consider
a variety of factors including, but not limited to, historical loss experience, estimated defaults based on portfolio trends, and general economic
and business trends. These statistical models predict forecasted losses inherent in the portfolio.

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The forecasted losses consider historical factors such as frequency (the number of contracts that we expect to default) and loss severity
(the loss amount of contracts we expect to default). The loss severity within the consumer automotive portfolio segment is impacted by the
market values of vehicles that are repossessed. Vehicle market values are affected by numerous factors including vehicle supply, the condition
of the vehicle upon repossession, the overall price and volatility of gasoline or diesel fuel, consumer preference related to specific vehicle
segments, and other factors.

The quantitative assessment component of the allowance may be supplemented with qualitative reserves based on management’s
determination that such adjustments provide a better estimate of credit losses. This qualitative assessment takes into consideration relevant
internal and external factors that have occurred but are not yet reflected in the forecasted losses and may affect the performance of the
portfolio.

Consumer Mortgage Portfolio Segment

The allowance for loan losses within the consumer mortgage portfolio segment is calculated by using proprietary statistical models based

on pools of loans with similar risk characteristics, including credit score, loan-to-value, loan age, documentation type, product type, and loan
purpose, to arrive at an estimate of incurred losses in the portfolio. These statistical loss forecasting models are utilized to estimate incurred
losses and consider a variety of factors including, but not limited to, historical loss experience, estimated foreclosures or defaults based on
portfolio trends, delinquencies, and general economic and business trends.

The forecasted losses are statistically derived based on a suite of behavioral based transition models. This transition framework predicts

various stages of delinquency, default, and voluntary prepayment over the course of the life of the loan. The transition probability is a function
of the loan and borrower characteristics and economic variables and considers historical factors such as frequency and loss severity. When a
default event is predicted, a severity model is applied to estimate future loan losses. Loss severity within the consumer mortgage portfolio
segment is impacted by the market values of foreclosed properties, which is affected by numerous factors, including geographic
considerations and the condition of the foreclosed property.

Commercial Loans

The allowance for loan losses within the commercial portfolio is composed of reserves established for specific loans evaluated as
impaired and portfolio-level reserves based on nonimpaired loans grouped into pools based on similar risk characteristics and collectively
evaluated.

A commercial loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the
contractual terms of the loan agreement based on current information and events. These loans are primarily evaluated individually and are
risk-rated based on borrower, collateral, and industry-specific information that management believes is relevant in determining the occurrence
of a loss event and measuring impairment. Management establishes specific allowances for commercial loans determined to be individually
impaired based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, observable market price or
the fair value of collateral, whichever is determined to be the most appropriate. Estimated costs to sell or realize the value of the collateral on
a discounted basis are included in the impairment measurement, when appropriate.

Loans not identified as impaired are grouped into pools based on similar risk characteristics and collectively evaluated. Our risk rating
models use historical loss experience, concentrations, current economic conditions, and performance trends. The commercial historical loss
experience is updated quarterly to incorporate the most recent data reflective of the current economic environment. The determination of the
allowance is influenced by numerous assumptions and many factors that may materially affect estimates of loss, including volatility of loss
given default, probability of default, and rating migration. In assessing the risk rating of a particular loan, several factors are considered
including an evaluation of historical and current information involving subjective assessments and interpretations. In addition, the allowance
related to the commercial portfolio segment is influenced by estimated recoveries from automotive manufacturers relative to guarantees or
agreements with them to repurchase vehicles used as collateral to secure the loans.

Securitizations and Variable Interest Entities

For all VIEs in which we are involved, we assess whether we are the primary beneficiary of the VIE on an ongoing basis. In

circumstances where we have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to
absorb losses or the right to receive benefits of the VIE that could be significant, we would conclude that we are the primary beneficiary of
the VIE, and would consolidate the VIE. In situations where we are not deemed to be the primary beneficiary of the VIE, we do not
consolidate the VIE and only recognize our interests in the VIE.

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We are involved in securitization transactions that typically involve the use of VIEs. For information regarding the company’s

securitization activities, refer to Note 11.

In the case of a consolidated VIE used for a securitization transaction, the underlying automotive finance retail contracts, wholesale
loans, and automotive leases remain on our Consolidated Balance Sheet with the corresponding obligations (consisting of the beneficial
interests issued by the securitization entity) reflected as debt. We recognize interest income on the finance receivables, lease income on
automotive leases, and interest expense on the beneficial interests issued by the securitization entity; and we recognize loan losses on the
finance receivables and loans as incurred. Consolidation of the VIE would also preclude us from recording an accounting sale on the
transaction.

In securitization transactions where we are not determined to be the primary beneficiary of the VIE, we must determine whether or not

we achieve a sale for accounting purposes. In order to achieve a sale of finance receivables and loans for accounting purposes, the assets
being transferred must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond our control.
We would deem the transaction to be an off-balance sheet securitization if the preceding three criteria for sale accounting are met. If we were
to fail any of these three criteria for sale accounting, the transfer would be accounted for as a secured borrowing consistent with the preceding
paragraph.

The gain or loss recognized on off-balance sheet securitizations take into consideration any assets received as part of the transaction,

including any retained interests, and servicing assets or liabilities (if applicable), which are initially recorded at fair value at the date of sale.
Upon the sale of the loans, we recognize a gain or loss on sale for the difference between the assets recognized, and the assets derecognized.
The financial assets obtained from off-balance sheet securitizations are primarily reported as cash, or retained interests (if applicable).
Retained interests are classified as securities or as other assets depending on their form and structure. The estimate of the fair value of the
retained interests and servicing requires us to exercise significant judgment about the timing and amount of future cash flows from the
interests. For a discussion on fair value estimates, refer to Note 25.

Gains or losses on off-balance sheet securitizations are reported in gain on mortgage and automotive loans, net, in our Consolidated

Statement of Comprehensive Income.

We retain servicing rights for all of our consumer and commercial automotive loan and operating lease securitizations. We may receive
servicing fees for off-balance sheet securitizations based on the securitized loan balances and certain ancillary fees, all of which are reported
in servicing fees in the Consolidated Statement of Income. Typically, the fee we are paid for servicing consumer automotive finance
receivables represents adequate compensation, and consequently, does not result in the recognition of a servicing asset or liability.

Repossessed and Foreclosed Assets

Assets securing our finance receivables and loans are classified as repossessed and foreclosed and included in other assets when physical

possession of the collateral is taken, which includes the transfer of title through foreclosure or other similar proceedings. Repossessed and
foreclosed assets are initially recognized at the lower of the outstanding balance at the time of repossession or foreclosure or the fair value of
the asset less estimated costs to sell. Losses on the revaluation of repossessed and foreclosed assets (and generally, declines in value shortly
after repossession or foreclosure) are recognized as a charge-off of the allowance for loan losses. Subsequent declines in value are charged to
other operating expenses.

Investment in Operating Leases

Investment in operating leases, net, represents the automobiles that are underlying our automotive lease contracts and is reported at cost,
less accumulated depreciation and net of impairment charges and origination fees or costs. Depreciation of vehicles is recorded on a straight-
line basis to an estimated residual value over the lease term. Manufacturer support payments that we receive upfront are treated as a reduction
to the cost-basis in the underlying lease asset, which has the effect of reducing depreciation expense over the life of the contract. We
periodically evaluate our depreciation rate for leased vehicles based on expected residual values and adjust depreciation expense over the
remaining life of the lease if deemed necessary. Income from operating lease assets that includes lease origination fees, net of lease
origination costs, is recognized as operating lease revenue on a straight-line basis over the scheduled lease term.

We have significant investments in the residual values of the assets in our operating lease portfolio. The residual values represent an

estimate of the values of the assets at the end of the lease contracts. At contract inception, we determine pricing based on the projected
residual value of the lease vehicle. This evaluation is primarily based on a proprietary model, which includes variables such as age, expected
mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and shifts in
used vehicle supply. This internally-generated data is compared against third-party, independent data for reasonableness. Realization of the
residual values is dependent on our future ability to market the vehicles under the prevailing market conditions. Over the life of the lease, we
evaluate the adequacy of our estimate of the residual value and make adjustments to the depreciation rates to the extent the expected value of
the vehicle at lease termination changes. In addition to estimating the residual value at lease termination, we also evaluate the current value of
the operating lease asset and test for impairment to the extent necessary when there is an indication of impairment based on market
considerations and portfolio characteristics. Impairment is determined to exist if fair value of the leased asset is less than carrying value and it
is determined that the net carrying value is not recoverable. The net carrying value of a leased asset is not recoverable if it exceeds the sum of
the undiscounted expected future cash flows expected to result from the lease payments and the estimated residual value upon eventual
disposition. If our operating lease assets are considered to be impaired, the impairment is measured as the amount by which the carrying
amount of the assets exceeds the fair value as estimated by discounted cash flows. No impairment was recognized in 2017, 2016, or 2015. We

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accrue rental income on our operating leases when collection is reasonably assured. We generally discontinue the accrual of revenue on
operating leases at the time an account is determined to be uncollectible, at the earliest of the time of repossession, within 60 days of
bankruptcy notification and greater than 60 days past due, or greater than 120 days past due.

When a lease vehicle is returned to us, either at the end of the lease term or through repossession, the asset is reclassified from
investment in operating leases, net, to other assets and recorded at the lower-of-cost or estimated fair value, less costs to sell, on our
Consolidated Balance Sheet. Any losses recognized at this time are recorded as depreciation expense. Subsequent decline in value and any
gain or loss recognized at the time of sale is recognized as a remarketing gain or loss and presented as a component of depreciation expense.

Impairment of Long-lived Assets

The net carrying values of long-lived assets (including property and equipment) are evaluated for impairment whenever events or
changes in circumstances indicate that their net carrying values may not be recoverable from the estimated undiscounted future cash flows
expected to result from their use and eventual disposition. Recoverability of assets to be held and used is measured by a comparison of their
net carrying amount to future net undiscounted cash flows expected to be generated by the assets. If these assets are considered to be
impaired, the impairment is measured as the amount by which the net carrying amount of the assets exceeds the fair value estimated using a
discounted cash flow method. No material impairment was recognized in 2017, 2016, or 2015.

An impairment test on an asset group to be sold or otherwise disposed of is performed upon occurrence of a triggering event or when
certain criteria are met (e.g., the asset is planned to be disposed of within twelve months, appropriate levels of authority have approved the
sale, there is an active program to locate a buyer, etc.), which cause the disposal group to be classified as held-for-sale. Long-lived assets
held-for-sale are recorded at the lower of their carrying amount or estimated fair value less cost to sell. If the net carrying value of the assets
held-for-sale exceeds the fair value less cost to sell, we recognize an impairment loss based on the excess of the net carrying amount over the
fair value of the assets less cost to sell. Refer to Note 3 for a discussion of discontinued operations.

Property and Equipment

Property and equipment stated at cost, net of accumulated depreciation and amortization, are reported in other assets on our Consolidated

Balance Sheet. Included in property and equipment are certain buildings, furniture and fixtures, leasehold improvements, IT hardware and
software, capitalized software costs, and assets under construction. We begin depreciating these assets when they are ready for their intended
use. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets, which generally ranges from three to
thirty years depending on the asset class. Capitalized software is generally amortized on a straight-line basis over its useful life, which
generally ranges from three to five years. Capitalized software that is not expected to provide substantive service potential or for which
development costs significantly exceed the amount originally expected is considered impaired and written down to fair value. Software
expenditures that are considered general, administrative, or of a maintenance nature are expensed as incurred.

Business Combinations

We account for our business acquisitions using the acquisition method of accounting. Under this method, we generally record the initial

carrying values of purchased assets, including identifiable intangible assets, and assumed liabilities at fair value on the acquisition date. We
recognize goodwill when the acquisition price is greater than the fair value of the net assets acquired, including identifiable intangible assets.
The initial fair value of recognized assets and liabilities are subject to refinement during the measurement period, a period up to one year after
the closing date of an acquisition, as information relative to acquisition date fair values becomes available. Costs directly related to business
combinations are recorded as expenses as they are incurred.

Goodwill and Other Intangibles

Goodwill and intangible assets, net of accumulated amortization, are reported in other assets.

Our intangible assets primarily consist of acquired customer relationships and developed technology, and are amortized using a straight

line methodology over their estimated useful lives. We review intangible assets for impairment at least annually, or whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If it is determined the carrying amount of the
asset is not recoverable, an impairment charge is recorded. Refer to Note 2 for further discussion on intangible assets.

Goodwill represents the excess of the cost of an acquisition over the fair value of net assets acquired, including identifiable intangibles.
We allocate goodwill to applicable reporting units based on the relative fair value of the other net assets allocated to those reporting units at
the time of the acquisition. In the event we restructure our business, we may reallocate goodwill. We test goodwill for impairment annually, or
more frequently if events and changes in circumstances indicate that it is more likely than not that impairment exists. Our annual goodwill
impairment test is performed as of August 31 of each year. In certain situations, we may perform a qualitative assessment to test goodwill for
impairment. We may also decide to bypass the qualitative assessment and perform a quantitative assessment. If we perform the qualitative
assessment to test goodwill for impairment and conclude that it is more likely than not that the reporting unit’s fair value is greater than its
carrying value, then the quantitative assessment is not required. However, if we perform the qualitative assessment and determine that it is
more likely than not that a reporting unit’s fair value is less than its carrying value, then we must perform the quantitative assessment. The
quantitative assessment uses a two-step process. The first step of the assessment requires us to compare the fair value of each of the reporting
units to their respective carrying value. The fair value of the reporting units in our quantitative assessment is determined based on various
analyses including discounted cash flow projections using assumptions a market participant would use. If the carrying value is less than the
fair value, no impairment exists, and the second step does not need to be completed. If the carrying value is greater than the fair value or there

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is an indication that impairment may exist, a second step must be performed where we determine the implied value of goodwill based on the
individual fair values of the reporting unit’s assets and liabilities, including unrecognized intangibles, to compute the amount of the
impairment. Refer to Note 2 for further discussion on goodwill.

Unearned Insurance Premiums and Service Revenue

Insurance premiums, net of premiums ceded to reinsurers, and service revenue are earned over the terms of the policies. The portion of

premiums and service revenue written applicable to the unexpired terms of the policies is recorded as unearned insurance premiums or
unearned service revenue. For vehicle service and maintenance contracts, premiums and service revenues are earned on a basis proportionate
to the anticipated cost emergence. For other short duration contracts, premiums and service revenue are earned on a pro rata basis. For further
information, refer to Note 4.

Deferred Insurance Policy Acquisition Costs

Certain incremental direct costs incurred to originate a policy are deferred and recorded in other assets. These costs primarily include

commissions paid to dealers to originate these policies and vary with the production of business. Deferred policy acquisition costs are
amortized over the terms of the related policies and service contracts on the same basis as premiums and service revenue are earned. We
group costs incurred for acquiring like contracts and consider anticipated investment income in determining the recoverability of these costs.

Reserves for Insurance Losses and Loss Adjustment Expenses

Reserves for insurance losses and loss adjustment expenses are reported in accrued expenses and other liabilities on our Consolidated

Balance Sheet. They are established for the unpaid cost of insured events that have occurred as of a point in time. More specifically, the
reserves for insurance losses and loss adjustment expenses represent the accumulation of estimates for both reported losses and those
incurred, but not reported, including loss adjustment expenses relating to direct insurance and assumed reinsurance agreements.

We use a combination of methods, including the chain ladder development factor, expected loss, Bornhuetter Ferguson (BF), and

frequency and severity methods to determine the ultimate losses for an individual line of business as well as accident year basis depending on
the maturity of the accident period and line of business specifics. Development methods are used for more mature years where expected loss,
BF, and frequency and severity methods are used for less mature years. Both paid and incurred loss and loss adjustment expenses are
reviewed where available and a weighted average of estimates or a single method may be considered in selecting the final estimate for an
individual accident period. We did not change our methodology for developing reserves for insurance losses for the year ended December 31,
2017.

Estimates for salvage and subrogation recoverable are recognized at the time losses are incurred and netted against the provision for
insurance losses and loss adjustment expenses. Reserves are established for each business at the lowest meaningful level of homogeneous
data. Since the reserves are based on estimates, the ultimate liability may vary from such estimates. The estimates are regularly reviewed and
adjustments, which can potentially be significant, are included in earnings in the period in which they are deemed necessary.

Legal and Regulatory Reserves

Reserves for legal and regulatory matters are established when those matters present loss contingencies that are both probable and
estimable, with a corresponding amount recorded to other operating expense. In cases where we have an accrual for losses, it is our policy to
include an estimate for probable and estimable legal expenses related to the case. If, at the time of evaluation, the loss contingency related to a
legal or regulatory matter is not both probable and estimable, we do not establish a liability for the contingency. We continue to monitor legal
and regulatory matters for further developments that could affect the requirement to establish a liability or that may impact the amount of a
previously established liability. There may be exposure to loss in excess of any amounts recognized. For certain other matters where the risk
of loss is determined to be reasonably possible, estimable, and material to the financial statements, disclosure regarding details of the matter
and an estimated range of loss is required. The estimated range of possible loss does not represent our maximum loss exposure. We also
disclose matters that are deemed probable or reasonably possible, material to the financial statements, but for which an estimated range of loss
is not possible to determine. While we believe our reserves are adequate, the outcome of legal and regulatory proceedings is extremely
difficult to predict and we may settle claims or be subject to judgments for amounts that differ from our estimates. For information regarding
the nature of all material contingencies, refer to Note 30.

Earnings per Common Share

We compute basic earnings (loss) per common share by dividing net income (loss) from continuing operations attributable to common

stockholders after deducting dividends on preferred stock by the weighted-average number of common shares outstanding during the period.
We compute diluted earnings (loss) per common share by dividing net income (loss) from continuing operations after deducting dividends on
preferred stock by the weighted-average number of common shares outstanding during the period plus the dilution resulting from incremental
shares that would have been outstanding if dilutive potential common shares had been issued (assuming it does not have the effect of
antidilution), if applicable.

Derivative Instruments and Hedging Activities

We use derivative instruments primarily for risk management purposes. We do not use derivative instruments for speculative purposes.
Certain of our derivative instruments are designated as accounting hedges in qualifying relationships, whereas other derivative instruments
have not been designated as accounting hedges. In accordance with applicable accounting standards, all derivative instruments, whether
designated for hedge accounting or not, are required to be recorded on the balance sheet as assets or liabilities and measured at fair value. We
112

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

have elected to report the fair value of derivative assets and liabilities on a gross basis—including the fair value for the right to reclaim cash
collateral or the obligation to return cash collateral—arising from instruments executed with the same counterparty under a master netting
arrangement where we do not have the intent to offset. For additional information on derivative instruments and hedging activities, refer to
Note 22.

At the inception of a hedge accounting relationship, we designate each qualifying hedge relationship as a hedge of the fair value of a
specifically identified asset or liability (fair value hedge); as a hedge of the variability of cash flows to be received or paid, or forecasted to be
received or paid, related to a recognized asset or liability (cash flow hedge); or as a hedge of the foreign-currency exposure of a net
investment in a foreign operation (net investment hedge). We formally document all relationships between hedging instruments and hedged
items, as well as the risk management objectives for undertaking various hedge transactions. Both at hedge inception and on an ongoing basis,
we formally assess whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in fair values or
cash flows of hedged items.

Changes in the fair value of derivative instruments qualifying as fair value hedges, along with the gain or loss on the hedged asset or

liability attributable to the hedged risk, are recorded in current period earnings. For qualifying cash flow hedges, the effective portion of the
change in the fair value of the derivative financial instruments is recorded in accumulated other comprehensive income, and recognized in the
income statement when the hedged cash flows affect earnings. For a qualifying net investment hedge, the gain or loss is reported in
accumulated other comprehensive income as part of the cumulative translation adjustment. The ineffective portions of changes in fair value,
cash flow, and net investment hedges are immediately recognized in earnings, along with the portion of the change in fair value that is
excluded from the assessment of hedge effectiveness, if any.

Hedge accounting treatment is no longer applied if a derivative financial instrument is terminated, or if the hedge designation is removed
or assessed to be no longer highly effective. For terminated fair value hedges, any changes to the hedged asset or liability remain as part of the
basis of the hedged asset or liability and are recognized into income over the remaining life of the asset or liability. For terminated cash flow
hedges, unless it is probable that the forecasted cash flows will not occur within a specified period, any changes in fair value of the derivative
financial instrument previously recognized remain in accumulated other comprehensive income, and are reclassified into earnings in the same
period that the hedged cash flows affect earnings. Any previously recognized gain or loss for a net investment hedge continues to remain in
accumulated other comprehensive income until earnings are impacted by sale or liquidation of the associated foreign operation. In all
instances, after hedge accounting is no longer applied, any subsequent changes in fair value of the derivative instrument will be recorded into
earnings.

Changes in the fair value of derivative financial instruments held for risk management purposes that are not designated as accounting

hedges under GAAP are reported in current period earnings.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best

assessment of estimated future taxes to be paid. We are subject to income taxes predominantly in the United States. Significant judgments and
estimates are required in determining the consolidated income tax expense.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In

evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise we consider all available positive and
negative evidence including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent
financial operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations
and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pretax operating
income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies.

We recognize the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical

merits, that the position will be sustained upon examination. Also, we recognize accrued interest and penalties related to liabilities for
uncertain income tax positions in interest expense and other operating expenses, respectively. For additional information regarding our
provision for income taxes, refer to Note 23.

Share-based Compensation

Our compensation and benefits expenses include the cost of share-based awards. For equity classified share-based awards, compensation

cost is ratably charged to expense based on the grant date fair value of the awards over the applicable service periods. For liability classified
share-based awards, the associated liability is measured quarterly at fair value based on our share price and services rendered at the time of
measurement until the awards are paid, with changes in fair value charged to compensation expense in the period in which the change occurs.
We have made an accounting policy election to account for forfeitures of share-based awards as they occur. Refer to Note 24 for a discussion
of our share-based compensation plans.

Foreign Exchange

Foreign-denominated assets and liabilities resulting from foreign-currency transactions are valued using period-end foreign-exchange

rates and the results of operations and cash flows are determined using approximate weighted average exchange rates for the period.
Translation adjustments are related to foreign subsidiaries using local currency as their functional currency and are reported as a separate
component of accumulated other comprehensive income. Translation gains or losses are reclassified to earnings upon the substantial sale or

113

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

liquidation of our investments in foreign operations. We may elect to enter into foreign-currency derivatives to mitigate our exposure to
changes in foreign-exchange rates. Refer to the Derivative Instruments and Hedging Activities section above for a discussion of our hedging
activities of the foreign-currency exposure of a net investment in a foreign operation.

Recently Adopted Accounting Standards
Statement of Cash Flows — Restricted Cash (ASU 2016-18)

As of December 31, 2017, we elected to early-adopt Accounting Standards Update (ASU) 2016-18. The amendments in this update
require that amounts classified as restricted cash and restricted cash equivalents be included within the beginning-of-period and end-of-period
amounts along with cash and cash equivalents on the statement of cash flows. The amendments were applied retrospectively to all periods
presented within the statement of cash flows. The implementation of this guidance resulted in a change in presentation of our Consolidated
Statement of Cash Flows and additional disclosures surrounding restricted cash balances, but did not result in a change to our Consolidated
Statement of Income or Consolidated Balance Sheet.

Recently Issued Accounting Standards
Revenue from Contracts with Customers (ASU 2014-09)

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09. The purpose of this guidance is to streamline and

consolidate existing revenue recognition principles in GAAP and to converge revenue recognition principles with International Financial
Reporting Standards (IFRS). The core principle of the amendments is that an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in
exchange for those goods or services. The amendments include a five step process for consideration of the core principle, guidance on the
accounting treatment for costs associated with a contract, and disclosure requirements related to the revenue process. The FASB has issued
several additional ASUs to clarify guidance and provide implementation support for ASU 2014-09, as well as to delay the initial required
adoption date of the amendments by one year.

The amendments to the revenue recognition principles can be applied upon adoption either through a full retrospective application or on

a modified retrospective basis with a cumulative effect adjustment on the date of initial adoption with certain practical expedients. We will
adopt the new guidance effective January 1, 2018, using the modified retrospective approach applied to all contracts with customers not
completed upon adoption. A majority of our revenue streams are not within the scope of this ASU as they are governed by other accounting
standards. Management has determined that certain revenue streams and contractual arrangements are in scope of this guidance, including
deposit fees, revenue on certain noninsurance contracts, brokering commissions through our insurance operations, sales of off-lease vehicles,
remarketing fee income through SmartAuction, and commission and fee income generated through Ally Invest. Management does not expect
these amendments to impact current revenue recognition patterns for most of the in scope revenue streams and contracts. Under the current
guidance, a portion of revenue earned on noninsurance contracts, which includes vehicle service contracts (VSCs), guaranteed asset
protection (GAP) waiver contracts, and vehicle maintenance contracts (VMCs), is recognized at contract inception, while the remainder is
recognized over the contract term on a basis proportionate to the anticipated cost emergence. In addition, certain commissions incurred to
obtain a noninsurance contract are recognized as expense when incurred, and certain direct-response advertising costs are deferred and
recognized as expense on the same basis as revenue. Upon adoption, all revenue associated with noninsurance contracts will be recognized
over the contract term on a basis proportionate to the anticipated cost emergence. Further, commissions incurred to obtain these contracts will
be capitalized and recognized as expense over the contract term and all advertising costs will be recognized as expense when incurred. Upon
adoption of the amendments on January 1, 2018, we expect to recognize the cumulative effect of adoption by recording a reduction to our
opening retained earnings of approximately $126 million, net of income taxes. Additionally, upon implementation we expect to expand our
financial statement disclosures as required by the standard. While the adoption of the standard will defer the recognition of revenue and
certain costs, over time the total revenue and expense recognized will not change as a result of the adoption of the standard.

Financial Instruments — Recognition and Measurement of Financial Assets (ASU 2016-01)

In January 2016, the FASB issued ASU 2016-01. The amendments in this update modify the requirements related to the measurement of
certain financial instruments in the statement of financial condition and results of operations. For equity investments (other than investments
accounted for using the equity method), entities must measure such instruments at fair value with changes in fair value recognized in net
income. Changes in fair value for equity securities will no longer be recognized through other comprehensive income. Reporting entities may
continue to elect to measure certain equity investments that do not have a readily determinable fair value at cost with adjustments for
impairment and observable changes in price. In addition, for a liability (other than a derivative liability) that an entity measures at fair value,
any change in fair value related to the instrument-specific credit risk, that is the entity’s own-credit, should be presented separately in other
comprehensive income and not as a component of net income. The amendments are effective on January 1, 2018. The amendments must be
applied on a modified retrospective basis with a cumulative effect adjustment as of the beginning of the fiscal year of initial adoption. While
the amendment requiring equity investments to be measured at fair value with changes in fair value recognized in net income will create
additional volatility in our Consolidated Statement of Comprehensive Income, we do not anticipate the other amendments will have a material
impact to our financial statements. Upon adoption of the amendments on January 1, 2018, we expect to record a reduction to our opening
retained earnings of approximately $20 million, net of income taxes, primarily as a result of transferring net unrealized losses on investment
securities from accumulated other comprehensive income to accumulated deficit.

114

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Leases (ASU 2016-02)

In February 2016, the FASB issued ASU 2016-02. The amendments in this update primarily replace the existing accounting requirements

for operating leases for lessees. Lessee accounting requirements for finance leases, and lessor accounting requirements for operating leases
and sales type and direct financing leases (sales type and direct financing leases were both previously referred to as capital leases) are largely
unchanged. The amendments require the lessee of an operating lease to record a balance sheet gross-up upon lease commencement by
recognizing a right-of-use asset and lease liability equal to the present value of the lease payments. The right-of-use asset and lease liability
should be derecognized in a manner that effectively yields a straight line lease expense over the lease term. In addition to the changes to the
lessee operating lease accounting requirements, the amendments also change the types of costs that can be capitalized related to a lease
agreement for both lessees and lessors for all types of leases. The amendments also require additional disclosures for all lease types for both
lessees and lessors. The amendments are effective on January 1, 2019, with early adoption permitted. The amendments must be applied on a
modified retrospective basis with a cumulative adjustment to the beginning of the earliest fiscal year presented in the financial statements in
the period of adoption. Management is currently evaluating the impact of these amendments. Upon adoption, we expect to record a balance
sheet gross-up, reflecting our right-of-use asset and lease liability for our operating leases where we are the lessee (for example, our facility
leases). We are currently reviewing our operating lease contracts where we are the lessee to determine the impact of the gross-up and the
changes to capitalizable costs. We are also reviewing our leases where we are the lessor to determine the impact of the changes to
capitalizable costs. We currently plan to adopt these amendments on January 1, 2019, and expect to use the modified retrospective approach
as required.

Financial Instruments — Credit Losses (ASU 2016-13)

In June 2016, the FASB issued ASU 2016-13. The amendments in this update introduce a new accounting model to measure credit losses

for financial assets measured at amortized cost. Credit losses for financial assets measured at amortized cost should be determined based on
the total current expected credit losses over the life of the financial asset or group of financial assets. In effect, the financial asset or group of
financial assets should be presented at the net amount expected to be collected. Credit losses will no longer be recorded under the current
incurred loss model for financial assets measured at amortized cost. The amendments also modify the accounting for available-for-sale debt
securities whereby credit losses will be recorded through an allowance for credit losses rather than a write-down to the security’s cost basis,
which allows for reversals of credit losses when estimated credit losses decline. Credit losses for available-for-sale debt securities should be
measured in a manner similar to current GAAP. The amendments are effective on January 1, 2020, with early adoption permitted as of
January 1, 2019. The amendments must be applied using a modified retrospective approach with a cumulative-effect adjustment through
retained earnings as of the beginning of the fiscal year upon adoption. The new accounting model for credit losses represents a significant
departure from existing GAAP, and will likely materially increase the allowance for credit losses with a resulting negative adjustment to
retained earnings. Management created a formal working group to govern the implementation of these amendments consisting of key
stakeholders from finance, risk, and accounting and is currently evaluating the impact of the amendments. We are in the process of designing
and building the models and procedures that will be used to calculate the credit loss reserves in accordance with these amendments. We
currently plan to adopt these amendments on January 1, 2020, and expect to use the modified retrospective approach as required.

Receivables — Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities
(ASU 2017-08)

In March 2017, the FASB issued ASU 2017-08. The amendments in this update require premiums on purchased callable debt securities

to be amortized to the security’s earliest call date. Prior to this ASU, premiums and discounts on purchased callable debt securities were
generally required to be amortized to the security’s maturity date. The amendments do not require an accounting change for securities held at
a discount. The amendments are effective on January 1, 2019, with early adoption permitted. The amendments must be applied using a
modified retrospective approach with a cumulative-effect adjustment through retained earnings as of the beginning of the fiscal year upon
adoption. While our assessment is not final, we do not expect the amendments to have a material impact to our financial statements. We
currently plan to adopt these amendments on January 1, 2019, and expect to use the modified retrospective approach as required.

Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12)

In August 2017, the FASB issued ASU 2017-12, which enhances the financial reporting of hedging relationships to better portray the
economic results of an entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the
application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity’s risk management
activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying
hedging relationships and presentation of hedge results. The amendments are effective on January 1, 2019, with early adoption permitted.
Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified
retrospective approach. All transition requirements and elections must be applied to hedging relationships existing as of the adoption date and
the effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The presentation and disclosure requirements must
be applied prospectively. We currently plan to early-adopt these amendments on January 1, 2018, and do not expect to recognize a cumulative
effect adjustment to opening retained earnings for cash flow and net investment hedging relationships that exist as of the adoption date.

Accumulated Other Comprehensive Income — Reclassification of Certain Tax Effects (ASU 2018-02)

In February 2018, the FASB issued ASU 2018-02. The amendments in this update provide guidance concerning the treatment of stranded

income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (the Tax Act). The
amendments will provide entities an election to reclassify these stranded income tax effects from accumulated other comprehensive income to
retained earnings. The reclassification amount will include the income tax effect resulting from the newly enacted federal corporate income

115

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

tax rate and other stranded tax amounts related to the Tax Act that we elect to reclassify. The amendments will also require additional
disclosures related to the election and an entity’s accounting policy for stranded income taxes. The amendments are effective on January 1,
2019, with early adoption permitted. The amendments can be applied retrospectively to each period(s) in which the amounts included in
accumulated other comprehensive income are impacted by the Tax Act or at the beginning of the annual or interim period in which the
amendments are adopted. Management is currently evaluating the impact and the timing of the adoption of these amendments, however we do
not expect the amendments to have a material impact to our financial statements.

2. Acquisitions

On June 1, 2016, we acquired 100% of the equity of TradeKing Group, Inc. (TradeKing), a digital wealth management company with an

online broker-dealer, digital portfolio management platform, and educational content for $298 million in cash. TradeKing, which has been
rebranded as Ally Invest, operates as a wholly-owned subsidiary of Ally Financial Inc. The addition of brokerage and wealth management is a
natural extension of our direct online bank, creating a full suite of financial products for savings and investments. We applied the acquisition
method of accounting to this transaction, which generally requires the initial recognition of assets acquired, including identifiable intangible
assets, and liabilities assumed at their respective fair value. Goodwill is recognized as the excess of the acquisition price after the recognition
of the net assets, including the identifiable intangible assets. Beginning in June 2016, financial information related to Ally Invest is included
within Corporate and Other.

The following table summarizes the allocation of cash consideration paid for TradeKing and the amounts of the identifiable assets

acquired and liabilities assumed recognized at the acquisition date.

($ in millions)

Purchase price

Cash consideration

Allocation of purchase price to net assets acquired

Intangible assets (a)

Cash and short-term investments (b)

Other assets

Deferred tax asset, net

Employee compensation and benefits

Other liabilities

Goodwill

298

(41)

(4)

193

(a) We recorded $10 million and $6 million of amortization on these intangible assets during the years ended December 31, 2017, and 2016, respectively.
(b)

Includes $40 million in cash proceeds from the acquisition transaction in order to pay employee compensation and benefits that vested upon acquisition as
a result of the change in control.

The goodwill of $193 million arising from the acquisition consists largely of expected growth of the business as we leverage the Ally

brand and our marketing capabilities to scale the acquired technology platform and expand the suite of financial products we offer to our
existing growing customer base. None of the goodwill recognized is expected to be deductible for income tax purposes. Refer to Note 14 for
the carrying amount of goodwill at the beginning and end of the reporting period.

On August 1, 2016, we acquired assets that constitute a business from Blue Yield, an online automotive lender exchange which we
rebranded as Clearlane, as we continue to expand our automotive finance offerings to include a direct-to-consumer option. We completed the
acquisition for $28 million of total consideration. As a result of the purchase, we recognized $20 million of goodwill within Automotive
Finance operations.

3. Discontinued Operations

Prior to the adoption of ASU 2014-08, which was prospectively applied only to newly identified disposals that qualify as discontinued

operations beginning after January 1, 2015, we have classified operations as discontinued when operations and cash flows will be eliminated
from our ongoing operations and we do not expect to retain any significant continuing involvement in their operations after the respective sale
or disposal transactions. For all periods presented, the operating results for these discontinued operations have been removed from continuing
operations and presented separately as discontinued operations, net of tax, in the Consolidated Statement of Income. The Notes to the
Consolidated Financial Statements have been adjusted to exclude discontinued operations unless otherwise noted.

Select Automotive Finance Operations

During the fourth quarter of 2012, we entered into an agreement with General Motors Financial Company Inc. (GMF) to sell our 40%

interest in a motor vehicle finance joint venture in China. On January 2, 2015, the sale of our interest in the motor vehicle finance joint
venture in China was completed and an after-tax gain of approximately $400 million was recorded. The tax expense included in this gain was
reduced by the release of the valuation allowance on our capital loss carryforward deferred tax asset that was utilized to offset capital gains

116

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

stemming from this sale. The remaining activity relates to previous discontinued operations for which we continue to have minimal residual
costs.

Other Operations

Other operations relate to previous discontinued operations in our Insurance operations and Corporate Finance operating segments, and

other operations for which we continue to have wind-down, legal, and minimal operational costs.

Select Financial Information

Select financial information of discontinued operations is summarized below. The pretax income or loss includes direct costs to transact

a sale.

Year ended December 31, ($ in millions)

Select Automotive Finance operations

Pretax (loss) income (a)

Tax (benefit) expense (b)

Other operations

Pretax income (loss)

Tax benefit

2017

2016

2015

(4) $

(5)

(2) $

—

(41) $

(1)

452

(4)

(a)
(b)

Includes certain treasury and other corporate activity recognized within Corporate and Other.
Includes certain income tax activity recognized within Corporate and Other.

Insurance Premiums and Service Revenue Earned
The following table is a summary of insurance premiums and service revenue written and earned.

Year ended December 31, ($ in millions)

Written

Earned

Written

Earned

Written

Earned

2017

2016

2015

Insurance premiums

Direct

Assumed

Gross insurance premiums

Ceded

Net insurance premiums

Service revenue

384

364

317

318

313

386

(254)

132

864

369

(188)

181

792

320

(198)

122

826

323

(141)

182

763

315

(184)

131

846

Insurance premiums and service revenue written

and earned

996

973

948

945

977

296

312

(125)

187

753

940

5. Other Income, Net of Losses

Details of other income, net of losses, were as follows.

Year ended December 31, ($ in millions)

Remarketing fees

Late charges and other administrative fees

Servicing fees

Income from equity-method investments

Other, net

Total other income, net of losses

2017

2016

2015

104

102

137

408

103

101

111

394

359

117

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

6. Reserves for Insurance Losses and Loss Adjustment Expenses

The following table shows cumulative incurred claims and allocated loss adjustment expenses, net of reinsurance.

For the years ended December 31, ($ in millions)

December 31, 2017 ($ in millions)

Accident year (a)

2012 (b)

2013 (b)

2014 (b)

2015 (b)

2016

2017

Total of incurred-but-
not-reported liabilities
plus expected
development on reported
claims (c)

Cumulative
number of
reported
claims (c)

2012

2013

2014

2015

2016

2017

Total

435

430

376

423

365

390

423

370

389

274

423

370

388

271

326

422

369

388

272

327

310

2,088

—

772,546

672,263

525,290

342,231

475,707

455,965

(a) Due to the discontinuation of various product lines and sale of certain international operations, information prior to 2013 has been excluded from the table
in order to appropriately reflect the number of years for which claims are typically outstanding. In addition, given the short tail of our insurance contracts,
the table above reflects the combined presentation of all business lines.
Information presented for the years 2012 through 2015 is unaudited supplementary information.

(b)
(c) Claims are reported on a claimant basis. Claimant is defined as one vehicle for guaranteed asset protection (GAP) products, one repair visit for vehicle

service contracts (VSCs) and vehicle maintenance contracts (VMCs), one dealership for dealer inventory products, and per individual/coverage for run-off
personal automotive products.

The following table shows cumulative paid claims and allocated loss adjustment expenses, net of reinsurance.

Accident year (a)

2012 (b)

2013 (b)

2014 (b)

2015 (b)

2016

2017

For the years ended December 31, ($ in millions)

2012

2013

2014

2015

2016

2017

Total

All outstanding liabilities for loss and allocated loss adjustment

expenses before 2012, net of reinsurance

Reserves for insurance losses and allocated loss adjustment

expenses, net of reinsurance

391

412

347

416

364

369

418

366

388

252

419

368

388

272

302

421

368

388

272

327

289

2,065

(b)

The following table shows the average annual percentage payout of incurred claims by age, net of reinsurance. The information

presented is unaudited supplementary information.

Year

Percentage payout of incurred claims

93.0%

5.7%

0.4%

0.3%

0.2%

0.4%

118

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table shows a reconciliation of the disclosures of incurred and paid claims development to the reserves for insurance

losses and loss adjustment expenses.

December 31, ($ in millions)

Reserves for insurance losses and loss adjustment expenses, net of reinsurance

Total reinsurance recoverable on unpaid claims

Unallocated loss adjustment expenses

Total gross reserves for insurance losses and loss adjustment expenses

The following table shows a rollforward of our reserves for insurance losses and loss adjustment expenses.

($ in millions)

Total gross reserves for insurance losses and loss adjustment expenses at January 1,

Less: Reinsurance recoverable

Net reserves for insurance losses and loss adjustment expenses at January 1,

Net insurance losses and loss adjustment expenses incurred related to:

Current year

Prior years (a)

Total net insurance losses and loss adjustment expenses incurred

Net insurance losses and loss adjustment expenses paid or payable related to:

Current year

Prior years

Total net insurance losses and loss adjustment expenses paid or payable

Net reserves for insurance losses and loss adjustment expenses at December 31,

Plus: Reinsurance recoverable

Total gross reserves for insurance losses and loss adjustment expenses at December 31,

(a) There have been no material adverse changes to the reserve for prior years.

7. Other Operating Expenses

Details of other operating expenses were as follows.

2017

2016

108

140

108

149

2017

2016

149

108

332

—

332

(309)

(32)

(341)

108

140

169

120

345

(3)

342

(320)

(30)

(350)

108

149

Year ended December 31, ($ in millions)

Insurance commissions

Technology and communications

Lease and loan administration

Advertising and marketing

Professional services

Regulatory and licensing fees

Vehicle remarketing and repossession

Premises and equipment depreciation

Occupancy

Non-income taxes

Other

Total other operating expenses

2017

2016

2015

415

284

159

133

113

110

200

389

274

136

112

103

242

1,683

1,605

378

267

126

107

216

1,505

119

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Investment Securities
Our portfolio of securities includes bonds, equity securities, asset-backed securities, commercial and residential mortgage-backed

securities, and other investments. The cost, fair value, and gross unrealized gains and losses on investment securities were as follows.

December 31, ($ in millions)

Available-for-sale securities

Debt securities

U.S. Treasury

U.S. States and political subdivisions

Foreign government

Agency mortgage-backed residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

Total debt securities (a) (b)

Equity securities

850

153

14,412

2,517

541

933

1,262

22,499

553

Total available-for-sale securities

23,052

Held-to-maturity securities

Debt securities

Agency mortgage-backed

residential (c) (d)

Asset-backed retained notes

Total held-to-maturity securities

1,863

1,899

2017

2016

Amortized
cost

Gross unrealized

gains

losses

Fair
value

Amortized
cost

Gross unrealized

gains

losses

Fair
value

1,831

$ — $

(54) $

1,777

1,680

$ — $

(60) $

1,620

—

(7)

(1)

(156)

(34)

(1)

(11)

(265)

(48)

854

154

14,291

2,494

541

936

1,256

22,303

518

794

157

10,473

2,162

537

1,396

1,452

18,651

642

(313) $ 22,821

19,293

(19)

—

(212)

(70)

(2)

(16)

(381)

(54)

782

162

10,290

2,097

537

1,400

1,443

18,331

595

(435) $ 18,926

(37) $

1,829

—

(37) $

1,865

839

$ — $

(50) $

—

839

$ — $

(50) $

789

—

789

(a) Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled

(b)

$12 million and $14 million at December 31, 2017, and 2016, respectively.
Investment securities with a fair value of $7,804 million and $4,881 million at December 31, 2017, and 2016, respectively, were pledged to secure
advances from the Federal Home Loan Bank (FHLB), short-term borrowings or repurchase agreements, or for other purposes as required by contractual
obligation or law. Under these agreements, we have granted the counterparty the right to sell or pledge $1,025 million and $737 million of the underlying
investment securities at December 31, 2017, and 2016, respectively.

(c) Agency mortgage-backed residential debt securities are held for liquidity risk management purposes.
(d) Securities with a fair value of $664 million and $87 million at December 31, 2017, and 2016, respectively, were pledged to secure advances from the

FHLB.

120

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The maturity distribution of investment securities outstanding is summarized in the following tables. Call or prepayment options may

cause actual maturities to differ from contractual maturities.

($ in millions)

December 31, 2017

Fair value of available-for-sale debt

securities (a)

U.S. Treasury

U.S. States and political

subdivisions

Foreign government

Agency mortgage-backed

residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

Total

Due in one year
or less

Due after one
year through
five years

Due after five
years through
ten years

Due after ten
years

Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield

$ 1,777

1.7% $

— —% $

487

1.7% $ 1,290

1.8% $

— —%

854

154

14,291

2,494

541

936

1,256

2.9

2.5

3.1

3.2

3.1

2.9

1.8

— —

140

2.6

2.3

2.5

— —

698

513

3.1

2.6

203

2.5

2.4

539

3.3

— —

2.9

— —

14,288

2,494

106

564

3.1

3.2

480

132

3.1

3.2

2.8

4.7

Total available-for-sale debt

securities

$ 22,303

3.0

Amortized cost of available-for-sale

debt securities

$ 22,499

216

2.3

$ 1,844

2.5

$ 2,271

2.3

$ 17,972

3.1

217

$ 1,852

$ 2,314

$ 18,116

Amortized cost of held-to-maturity

securities

Agency mortgage-backed

residential

$ 1,863

3.1% $

— —% $

— —% $ 1,863

3.1%

Asset-backed retained notes

Total held-to-maturity securities

$ 1,899

1.7

3.1

— —

— — $

1.7

3.0

— —

$ 1,863

3.1

December 31, 2016

Fair value of available-for-sale debt

securities (a)

U.S. Treasury

U.S. States and political

subdivisions

Foreign government

Agency mortgage-backed

residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

$ 1,620

1.7 % $

4.6 % $

782

162

10,290

2,097

537

1,400

1,443

3.1

2.6

2.9

2.6

2.8

1.7

— —

2.2

1.6 % $ 1,558

1.7 % $

— — %

2.3

2.8

172

104

2.8

2.4

517

3.4

— —

1,059

840

2.8

2.6

— —

10,261

2,097

143

489

2.8

3.2

534

198

2.9

2.6

4.7

Total available-for-sale debt

securities

$ 18,331

2.8

Amortized cost of available-for-sale

debt securities

$ 18,651

138

2.0

$ 2,046

2.7

$ 2,498

2.2

$ 13,649

2.9

138

$ 2,040

$ 2,563

$ 13,910

Amortized cost of held-to-maturity

securities (b)

839

2.9 % $

— — % $

839

2.9 %

(a) Yield is calculated using the effective yield of each security at the end of the period, weighted based on the market value. The effective yield considers the

contractual coupon and amortized cost, and excludes expected capital gains and losses.

(b) Our held-to-maturity securities portfolio as of December 31, 2016, consisted of agency mortgage-backed residential debt securities.

The balances of cash equivalents were $10 million and $291 million at December 31, 2017, and 2016, respectively, and were composed

primarily of money market accounts and short-term securities, including U.S. Treasury bills.

121

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents interest and dividends on investment securities.

Year ended December 31, ($ in millions)

Taxable interest

Taxable dividends

Interest and dividends exempt from U.S. federal income tax

Interest and dividends on investment securities

2017

2016

2015

534

375

568

411

340

381

The following table presents gross gains and losses realized upon the sales of available-for-sale securities and other-than-temporary

impairment.

Year ended December 31, ($ in millions)

Gross realized gains

Gross realized losses (a)

Other-than-temporary impairment

Other gain on investments, net

2017

2016

2015

106

187

(4)

—

(2)

—

102

185

184

(15)

(14)

155

(a) Certain available-for-sale securities were sold at a loss in 2017, 2016, and 2015 as a result of market conditions within these respective periods (e.g., a

downgrade in the rating of a debt security). Any such sales were made in accordance with our risk management policies and practices.

The table below summarizes available-for-sale securities in an unrealized loss position in accumulated other comprehensive income.

Based on the assessment of whether such losses were deemed to be other-than-temporary, we believe that the unrealized losses are not
indicative of an other-than-temporary impairment of these securities. As of December 31, 2017, we did not have the intent to sell the debt
securities with an unrealized loss position in accumulated other comprehensive income, it is not more likely than not that we will be required
to sell these securities before recovery of their amortized cost basis, and we expect to recover the entire amortized cost basis of the securities.
As of December 31, 2017, we had the ability and intent to hold equity securities with an unrealized loss position in accumulated other
comprehensive income, and it is not more likely than not that we will be required to sell these securities before recovery of their amortized
cost basis. As a result, we believe that the securities with an unrealized loss position in accumulated other comprehensive income are not
considered to be other-than-temporarily impaired at December 31, 2017. Refer to Note 1 for additional information related to investment
securities and our methodology for evaluating potential other-than-temporary impairments.

December 31, ($ in millions)

Available-for-sale securities

Debt securities

U.S. Treasury

U.S. States and political

subdivisions

Foreign government

Agency mortgage-backed

residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

Total temporarily impaired debt

securities

Temporarily impaired equity

securities

Total temporarily impaired

available-for-sale securities

2017

2016

Less than 12 months

12 months or longer

Less than 12 months

12 months or longer

Fair
value

Unrealized
loss

Fair
value

Unrealized
loss

Fair
value

Unrealized
loss

Fair
value

Unrealized
loss

471

(8) $ 1,305

(46) $ 1,612

(60) $

— $

242

4,066

857

220

529

6,541

126

(2)

(1)

(19)

(2)

(1)

(4)

183

5,671

773

194

(5)

—

(137)

(32)

—

(7)

524

8,052

813

375

744

(19)

—

(196)

(17)

(1)

(2)

(14)

—

587

860

149

127

(38)

8,242

(227)

12,205

(309)

1,769

(12)

116

(36)

151

(8)

269

—

(16)

(53)

(1)

—

(2)

(72)

(46)

$ 6,667

(50) $ 8,358

(263) $ 12,356

(317) $ 2,038

(118)

122

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

9. Finance Receivables and Loans, Net

The composition of finance receivables and loans reported at gross carrying value was as follows.

December 31, ($ in millions)

Consumer automotive (a)

Consumer mortgage

Mortgage Finance (b)

Mortgage — Legacy (c)

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

2017

2016

68,071

65,793

11,657

2,093

13,750

81,821

33,025

3,887

4,160

41,072

8,294

2,756

11,050

76,843

35,041

3,248

3,812

42,101

Total finance receivables and loans (d)

122,893

118,944

(a)

(b)

Includes $18 million and $43 million of fair value adjustment for loans in hedge accounting relationships at December 31, 2017, and December 31, 2016,
respectively. Refer to Note 22 for additional information.
Includes loans originated as interest-only mortgage loans of $20 million and $30 million at December 31, 2017, and December 31, 2016, respectively,
35% of which are expected to start principal amortization in 2019, and 45% in 2020. The remainder of these loans have already exited the interest-only
period.
Includes loans originated as interest-only mortgage loans of $496 million and $714 million at December 31, 2017, and December 31, 2016, respectively,
3% of which are expected to start principal amortization in 2018. The remainder of these loans have already exited the interest-only period.
(d) Totals include net increases of $551 million and $359 million at December 31, 2017, and December 31, 2016, respectively, for unearned income,

(c)

unamortized premiums and discounts, and deferred fees and costs.

The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans.

($ in millions)

Allowance at January 1, 2017

Charge-offs (a)

Recoveries

Net charge-offs

Provision for loan losses

Other (b)

Allowance at December 31, 2017

Allowance for loan losses at December 31, 2017

Individually evaluated for impairment

Collectively evaluated for impairment

Finance receivables and loans at gross carrying value

Ending balance

Individually evaluated for impairment

Collectively evaluated for impairment

Consumer
automotive

Consumer
mortgage

Commercial

Total

932

(1,344)

358

(986)

1,127

(7)

1,066

1,030

(30)

(6)

(7)

121

1,144

(18)

—

(18)

—

131

117

(1,392)

382

(1,010)

1,148

(6)

1,276

1,199

68,071

13,750

41,072

122,893

430

67,641

231

13,519

733

41,000

122,160

(a) Represents the amount of the gross carrying value directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the
difference between the gross carrying value of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 for more information regarding
our charge-off policies.

(b) Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

123

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

($ in millions)

Allowance at January 1, 2016

Charge-offs (a)

Recoveries

Net charge-offs

Provision for loan losses

Other (b)

Allowance at December 31, 2016

Allowance for loan losses at December 31, 2016

Individually evaluated for impairment

Collectively evaluated for impairment

Finance receivables and loans at gross carrying value

Ending balance

Individually evaluated for impairment

Collectively evaluated for impairment

Consumer
automotive

Consumer
mortgage

Commercial

Total

834

114

106

1,054

(1,102)

307

(795)

919

(26)

932

904

(39)

(7)

(16)

—

(1)

—

121

(1,142)

341

(801)

917

(26)

1,144

1,059

65,793

11,050

42,101

118,944

370

65,423

247

10,803

122

739

41,979

118,205

(b) Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

The following table presents information about significant sales of finance receivables and loans and transfers of finance receivables and

loans from held-for-investment to held-for-sale.

December 31, ($ in millions)

Consumer automotive

Consumer mortgage

Commercial

Total sales and transfers

The following table presents information about significant purchases of finance receivables and loans.

December 31, ($ in millions)

Consumer automotive

Consumer mortgage

Total purchases of finance receivables and loans

2017

2016

1,339

4,267

—

1,348

4,311

2017

2016

865

4,481

5,346

3,747

3,768

124

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents an analysis of our past due finance receivables and loans recorded at gross carrying value.

30–59 days
past due

60–89 days
past due

90 days
or more
past due

Total
past due

Current

Total finance
receivables and
loans

1,994

478

268

2,740

65,331

68,071

December 31, ($ in millions)

2017

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

Total consumer and commercial

2016

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

December 31, ($ in millions)

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

103

2,097

—

2,102

1,850

1,934

—

514

—

514

428

452

—

348

—

351

302

363

—

130

219

2,959

—

2,967

2,580

120

169

2,749

—

11,568

1,963

13,531

78,862

33,017

3,887

4,160

41,064

119,926

63,213

8,245

2,636

10,881

74,094

35,031

3,248

3,812

42,091

11,657

2,093

13,750

81,821

33,025

3,887

4,160

41,072

122,893

65,793

8,294

2,756

11,050

76,843

35,041

3,248

3,812

42,101

118,944

697

122

819

2017

2016

603

598

117

720

Total consumer and commercial

1,937

452

370

2,759

116,185

The following table presents the gross carrying value of our finance receivables and loans on nonaccrual status.

Total consumer and commercial finance receivables and loans

792

125

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Management performs a quarterly analysis of the consumer automotive, consumer mortgage, and commercial portfolios using a range of

credit quality indicators to assess the adequacy of the allowance for loan losses based on historical and current trends. The following tables
present the population of loans by quality indicators for our consumer automotive, consumer mortgage, and commercial portfolios.

The following table presents performing and nonperforming credit quality indicators in accordance with our internal accounting policies
for our consumer finance receivables and loans recorded at gross carrying value. Nonperforming loans include finance receivables and loans
on nonaccrual status when the principal or interest has been delinquent for 90 days or when full collection is not expected. Refer to Note 1 for
additional information.

December 31, ($ in millions)

Performing

Nonperforming

Total

Performing

Nonperforming

Total

2017

2016

67,468

603

68,071

65,195

598

65,793

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

81,101

11,632

2,001

13,633

117

720

11,657

2,093

13,750

8,284

2,667

10,951

81,821

76,146

697

8,294

2,756

11,050

76,843

The following table presents pass and criticized credit quality indicators based on regulatory definitions for our commercial finance

receivables and loans recorded at gross carrying value.

December 31, ($ in millions)

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

2017

2016

Pass

Criticized (a)

Total

Pass

Criticized (a)

Total

30,982

2,043

33,025

33,160

1,881

35,041

2,986

4,023

901

137

3,887

4,160

2,597

3,653

651

159

3,248

3,812

37,991

3,081

41,072

39,410

2,691

42,101

(a)

Includes loans classified as special mention, substandard, or doubtful. These classifications are based on regulatory definitions and generally represent
loans within our portfolio that have a higher default risk or have already defaulted.

Impaired Loans and Troubled Debt Restructurings
Impaired Loans

Loans are considered impaired when we determine it is probable that we will be unable to collect all amounts due according to the terms

of the loan agreement. For more information on our impaired finance receivables and loans, refer to Note 1.

126

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents information about our impaired finance receivables and loans.

Unpaid
principal
balance (a)

Gross
carrying
value

Impaired
with no
allowance

Impaired
with an
allowance

Allowance
for impaired
loans

438

430

339

December 31, ($ in millions)

2017

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

Total consumer and commercial finance receivables and loans

2016

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

Total consumer and commercial finance receivables and loans

(a) Adjusted for charge-offs.

—

228

236

674

756

407

243

251

658

137

795

223

231

661

733

370

239

247

617

122

739

153

—

172

131

190

—

199

165

169

508

561

239

183

188

427

113

540

127

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents average balance and interest income for our impaired finance receivables and loans.

Year ended December 31, ($ in millions)

2017

2016

2015

Average
balance

Interest
income

Average
balance

Interest
income

Average
balance

Interest
income

391

344

295

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

234

242

633

123

756

—

248

256

600

101

701

—

272

280

575

654

—

Total consumer and commercial finance receivables and loans

Troubled Debt Restructurings

TDRs are loan modifications where concessions were granted to borrowers experiencing financial difficulties. For automotive loans, we

may offer several types of assistance to aid our customers, including extension of the loan maturity date and rewriting the loan terms.
Additionally, for mortgage loans, as part of certain programs, we offer mortgage loan modifications to qualified borrowers. These programs
are in place to provide support to our mortgage customers in financial distress, including principal forgiveness, maturity extensions,
delinquent interest capitalization, and changes to contractual interest rates. Total TDRs recorded at gross carrying value were $712 million
and $663 million at December 31, 2017, and December 31, 2016, respectively.

Total commitments to lend additional funds to borrowers whose terms had been modified in a TDR were $6 million and $2 million at

December 31, 2017, and December 31, 2016, respectively. Refer to Note 1 for additional information.

The following table presents information related to finance receivables and loans recorded at gross carrying value modified in connection

with a TDR during the period.

Year ended December 31, ($ in millions)

2017

2016

Pre-
modification
gross
carrying value

Post-
modification
gross
carrying value

Number
of loans

Pre-
modification
gross
carrying value

Post-
modification
gross
carrying value

Number
of loans

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

Total consumer mortgage

Total consumer

Commercial

Commercial and industrial

Automotive

Other

Commercial real estate

Total commercial

26,156

380

333

20,227

347

122

126

26,282

—

402

120

127

355

20,354

—

368

—

293

314

—

Total consumer and commercial finance

receivables and loans

26,288

465

417

20,355

375

321

128

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents information about finance receivables and loans recorded at gross carrying value that have redefaulted
during the reporting period and were within 12 months or less of being modified as a TDR. Redefault is when finance receivables and loans
meet the requirements for evaluation under our charge-off policy (refer to Note 1 for additional information) except for commercial finance
receivables and loans, where redefault is defined as 90 days past due.

Year ended December 31, ($ in millions)

Consumer automotive

Consumer mortgage

Mortgage Finance

Mortgage — Legacy

2017

Gross
carrying
value

Number of
loans

Charge-
off amount

Number of
loans

2016

Gross
carrying
value

Charge-
off amount

8,829

102

—

7,800

—

7,804

—

Total consumer finance receivables and loans

8,832

103

Concentration Risk
Consumer

We monitor our consumer loan portfolio for concentration risk across the states in which we lend. The highest concentrations of loans are
in California and Texas, which represent an aggregate of 24.7% and 24.2% of our total outstanding consumer finance receivables and loans at
December 31, 2017, and December 31, 2016, respectively.

The following table shows the percentage of total consumer finance receivables and loans recorded at gross carrying value by state

concentration.

December 31,

California

Texas

Florida

Pennsylvania

Illinois

Georgia

North Carolina

Ohio

New York

Missouri

Other United States

Total consumer loans

2017 (a)

2016

Consumer
automotive

Consumer
mortgage

Consumer
automotive

Consumer
mortgage

8.2%

13.2

8.5

4.6

4.2

3.7

3.4

3.0

2.9

34.6%

6.5

4.8

1.5

3.2

2.5

1.8

0.5

2.2

0.9

7.8%

13.6

8.2

4.7

4.3

3.6

3.5

3.2

2.8

34.2%

6.6

4.4

1.5

3.4

2.2

1.6

0.5

1.9

1.2

44.1

100.0%

41.5

100.0%

44.0

100.0%

42.5

100.0%

(a) Presentation is in descending order as a percentage of total consumer finance receivables and loans at December 31, 2017.

129

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Commercial Real Estate

The commercial real estate portfolio consists of loans issued primarily to automotive dealers. The following table shows the percentage

of total commercial real estate finance receivables and loans reported at gross carrying value by state concentration.

December 31,

Texas

Florida

California

Michigan

Georgia

New Jersey

North Carolina

South Carolina

Pennsylvania

Missouri

Other United States

Total commercial real estate finance receivables and loans

Commercial Criticized Exposure

2017

2016

15.7%

10.3

16.1%

10.2

8.2

7.7

4.6

3.6

3.5

3.0

2.4

7.9

7.6

3.6

4.2

3.6

2.7

3.1

2.5

37.4

38.5

100.0%

Finance receivables and loans classified as special mention, substandard, or doubtful are reported as criticized. These classifications are

The following table presents the percentage of total commercial criticized finance receivables and loans reported at gross carrying value

by industry concentrations.

December 31,

Automotive

Services

Health/Medical

Other

Total commercial criticized finance receivables and loans

10. Investment in Operating Leases, Net
Investments in operating leases were as follows.

December 31, ($ in millions)

Vehicles

Accumulated depreciation

Investment in operating leases, net

2017

2016

76.3%

81.2%

6.7

4.9

12.1

6.3

2.3

10.2

100.0%

2017

2016

10,556

(1,815)

8,741

14,584

(3,114)

11,470

Depreciation expense on operating lease assets includes remarketing gains and losses recognized on the sale of operating lease assets.

The following summarizes the components of depreciation expense on operating lease assets.

Year ended December 31, ($ in millions)

Depreciation expense on operating lease assets (excluding remarketing gains)

Remarketing gains

Net depreciation expense on operating lease assets

2017

2016

2015

1,368

(124)

1,244

1,982

(213)

1,769

2,600

(351)

2,249

130

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents the future lease nonresidual rental payments due from customers for vehicles on operating leases.

Year ended December 31, ($ in millions)

2018

2019

2020

2021

2022 and thereafter

Total

1,319

839

364

2,572

11. Securitizations and Variable Interest Entities
Overview

We securitize, transfer, and service consumer and commercial automotive loans, and operating leases. We often securitize these loans and

notes secured by operating leases (collectively referred to as financial assets) through the use of special-purpose entities (SPEs). A SPE is a
legal entity that is designed to fulfill a specified limited need of the sponsor. Our principal use of SPEs is to obtain liquidity by securitizing
certain of our financial assets and operating lease assets which may, or may not, be included on our Consolidated Balance Sheet.

The transaction-specific SPEs involved in our securitization transactions are often considered VIEs. VIEs are entities that have either a

total equity investment at risk that is insufficient to permit the entity to finance its activities without additional subordinated financial support
or whose equity investors at risk lack the ability to control the entity’s activities.

Securitizations

In executing a securitization transaction, we typically sell pools of financial assets to a wholly-owned, bankruptcy-remote SPE, which
then transfers the financial assets to a separate, transaction-specific SPE for cash, and typically, other retained interests. The securitization
entity is funded through the issuance of beneficial interests, which could take the form of notes or residual interests, and can be sold to
investors and/or retained by us. We typically hold retained beneficial interests in our securitizations including, but not limited to, retained
notes, certificated residual interests, as well as certain noncertificated interests retained from the sale of automotive finance receivables. If
sold, the beneficial interests only entitle the investors to specified cash flows generated from the underlying securitized assets. If retained, the
interests provide credit enhancement to the SPE as they may absorb credit losses or other cash shortfalls and may represent a form of
significant continuing economic interests. In addition to providing a source of liquidity and cost-efficient funding, securitizing these financial
assets also reduces our credit exposure to the borrowers beyond any economic interest we may retain.

The SPEs are limited to specific activities by their respective legal documents, but are generally allowed to acquire the financial assets,
to issue beneficial interests to investors to fund the acquisition of the financial assets, and to enter into derivatives or other yield maintenance
contracts to hedge or mitigate certain risks related to the financial assets or beneficial interests of the entity. A servicer, who is generally us, is
appointed pursuant to the underlying legal documents to service the assets the SPE holds and the beneficial interests it issues. Servicing
functions include, but are not limited to, general collection activity on current and noncurrent accounts, loss mitigation efforts including
repossession and sale of collateral, as well as preparing and furnishing statements summarizing the asset and beneficial interest performance.
These servicing responsibilities constitute continued involvement in the transferred financial assets.

Cash flows from the securitized financial assets represent the sole source for payment of distributions on the beneficial interests issued

by the SPE and for payments to the parties that perform services for the SPE, such as the servicer or the trustee.

We generally hold certain conditional repurchase options specific to securitizations that allow us to repurchase assets from the

securitization entity. The majority of the securitizations provide us, as servicer, with a call option that allows us to repurchase the remaining
transferred financial assets or redeem outstanding beneficial interests at our discretion once the asset pool reaches a predefined level, which
represents the point where servicing becomes burdensome (a clean-up call option). The repurchase price is typically the discounted
securitization balance of the assets plus accrued interest when applicable. We generally have discretion regarding when or if we will exercise
these options, but we would do so only when it is in our best interest.

On December 24, 2016, the risk retention rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank

Act) of 2010 became effective, requiring us to retain at least five percent of the credit risk of the assets underlying asset-backed
securitizations.

Other than our customary representation and warranty provisions, these securitizations are nonrecourse to us, thereby transferring the

risk of future credit losses to the extent the beneficial interests in the securitization entities are held by third parties. Representation and
warranty provisions generally require us to repurchase assets or indemnify the investor or other party for incurred losses to the extent it is
determined that the assets were ineligible or were otherwise defective at the time of sale. We did not provide any non-contractual financial
support to any of these entities during 2017, 2016, or 2015.

131

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Variable Interest Entities

The determination of whether the assets and liabilities of the VIEs are consolidated on our balance sheet (also referred to as on-balance
sheet) or not consolidated on our balance sheet (also referred to as off-balance sheet) depends on the terms of the related transaction and our
continuing involvement (if any) with the VIE. We are deemed the primary beneficiary and therefore consolidate VIEs for which we have both
(a) the power, through voting rights or similar rights, to direct the activities that most significantly impact the VIE’s economic performance,
and (b) a variable interest (or variable interests) that (i) obligates us to absorb losses that could potentially be significant to the VIE; and/or
(ii) provides us the right to receive residual returns of the VIE that could potentially be significant to the VIE. We determine whether we hold
a significant variable interest in a VIE based on a consideration of both qualitative and quantitative factors regarding the nature, size, and
form of our involvement with the VIE. We assess whether we are the primary beneficiary of a VIE on an ongoing basis and are generally
determined to be the primary beneficiary in VIEs established for our securitization activities when we have a controlling financial interest in
the VIE, primarily due to our servicing activities, and our beneficial interest in the VIE that could be potentially significant. The consolidated
VIEs included on the Consolidated Balance Sheet represent separate entities with which we are involved. The third-party investors in the
obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to us, except for the
customary representation and warranty provisions. In addition, the cash flows from the assets are restricted only to pay such liabilities. Thus,
our economic exposure to loss from outstanding third-party financing related to consolidated VIEs is limited to the carrying value of the
consolidated VIE assets. Generally, all assets of consolidated VIEs, presented below based upon the legal transfer of the underlying assets in
order to reflect legal ownership, are restricted for the benefit of the beneficial interest holders. For additional information regarding the
company’s significant accounting policies for consolidated VIEs, refer to the Securitizations and Variable Interest Entities section of Note 1.

The nature, purpose, and activities of nonconsolidated securitization entities are similar to those of our consolidated securitization
entities with the primary difference being the nature and extent of our continuing involvement. Additionally, to qualify for off-balance sheet
treatment, transfers of financial assets must meet appropriate sale accounting conditions. For nonconsolidated securitization entities, the
transferred financial assets are removed from our balance sheet provided the conditions for sale accounting are met. The financial assets
obtained from the securitization are primarily reported as cash, or retained interests (if applicable). Liabilities incurred as part of these
securitization transactions, such as representation and warranty provisions, are recorded at fair value at the time of sale and are reported as
accrued expenses and other liabilities on our Consolidated Balance Sheet. Upon the sale of the loans, we recognize a gain or loss on sale for
the difference between the assets recognized, the assets derecognized, and the liabilities recognized as part of the transaction.

The pretax gain on sales of financial assets into non-consolidated VIEs was $2 million for the year ended December 31, 2017. There

were no pretax gains or losses for the year ended December 31, 2016, while there was a pretax loss of $3 million for the year ended
December 31, 2015. For additional information regarding the company’s significant accounting policies for non-consolidated VIEs, refer to
the Securitizations and Variable Interest Entities section of Note 1.

We provide long-term guarantee contracts to investors in certain nonconsolidated affordable housing entities and have extended a line of

credit to provide liquidity. Since we do not have control over the entities or the power to make decisions, we do not consolidate the entities
and our involvement is limited to the guarantee and the line of credit.

We have involvement with various other nonconsolidated equity investments, including affordable housing entities and venture capital

funds and loan funds. We do not consolidate these entities and our involvement is limited to our outstanding investment, additional capital
committed to these funds plus any previously recognized low income housing tax credits that are subject to recapture.

132

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents our involvement in consolidated and nonconsolidated VIEs in which we hold variable interests. For

additional detail related to the assets and liabilities of consolidated variable interest entities refer to the Consolidated Balance Sheet.

December 31, ($ in millions)

2017

On-balance sheet variable interest entities

Consumer automotive

Commercial automotive

Off-balance sheet variable interest entities

Consumer automotive

Commercial other

Total

2016

On-balance sheet variable interest entities

Consumer automotive

Commercial automotive

Off-balance sheet variable interest entities

Consumer automotive

Commercial other

Total

Carrying value
of total assets

Carrying value
of total liabilities

Assets sold to
nonconsolidated
VIEs (a)

Maximum exposure to
loss in nonconsolidated
VIEs

17,597 (b) $

7,677 (c)

12,550

2,558

37 (d)

592 (f)

—

248 (g)

30,776

10,483

20,869 (b) $

8,557 (c)

16,278

4,764

24 (f)

460 (f)

—

169 (g)

37,631

13,490

1,964

—

1,964

2,899

—

2,899

2,001 (e)

790 (h)

2,791

2,923 (e)

651 (h)

3,574

(a) Asset values represent the current unpaid principal balance of outstanding consumer finance receivables and loans within the VIEs.
(b)

Includes $8.5 billion and $9.6 billion of assets that are not encumbered by VIE beneficial interests held by third parties at December 31, 2017, and
December 31, 2016, respectively. Ally or consolidated affiliates hold the interests in these assets.
Includes $29 million and $50 million of liabilities that are not obligations to third-party beneficial interest holders at December 31, 2017, and
December 31, 2016, respectively.

(c)

(d) Represents retained notes and certificated residual interests, of which $36 million is classified as held-to-maturity securities and $1 million is classified as
other assets at December 31, 2017. These assets represent our compliance with the risk retention rules under the Dodd-Frank Act, requiring us to retain at
least five percent of the credit risk of the assets underlying asset-backed securitizations, which became effective on December 24, 2016.

(e) Maximum exposure to loss represents the current unpaid principal balance of outstanding loans, retained notes, certificated residual interests, as well as
certain noncertificated interests retained from the sale of automotive finance receivables. This measure is based on the very unlikely event that all of our
sold loans have defects that would trigger a representation and warranty provision and the underlying collateral supporting the loans becomes worthless.
This required disclosure is not an indication of our expected loss.

(f) Amounts are classified as other assets.
(g) Amounts are classified as accrued expenses and other liabilities.
(h) For certain nonconsolidated affordable housing entities, maximum exposure to loss represents the yield we guaranteed investors through long-term

guarantee contracts. The amount disclosed is based on the unlikely event that the underlying properties cease generating yield to investors and the yield
delivered to investors in the form of low income tax housing credits is recaptured. For nonconsolidated equity investments, maximum exposure to loss
represents our outstanding investment, additional committed capital, and low income housing tax credits subject to recapture. The amount disclosed is
based on the unlikely event that our committed capital is funded, our investments become worthless, and the tax credits previously delivered to us are
recaptured. This required disclosure is not an indication of our expected loss.

133

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

On-balance Sheet Variable Interest Entities

The consolidated VIEs included on the Consolidated Balance Sheet represent separate entities with which we are involved. The third-
party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to us,
except for the customary representation and warranty provisions. In addition, the cash flows from the assets are restricted only to pay such
liabilities. Thus, our economic exposure to loss from outstanding third-party financing related to consolidated VIEs is significantly less than
the carrying value of the consolidated VIE assets. All assets of consolidated VIEs, presented below based upon the legal transfer of the
underlying assets in order to reflect legal ownership, are restricted for the benefit of the beneficial interest holders.

December 31, ($ in millions)

Assets

Finance receivables and loans, net

Consumer

Commercial

Allowance for loan losses

Total finance receivables and loans, net

Investment in operating leases, net

Other assets

Total assets

Liabilities

Long-term debt

Accrued expenses and other liabilities

Total liabilities

2017

2016

8,186

12,437

(136)

20,487

444

689

21,620

10,197

10,206

8,929

15,701

(173)

24,457

1,745

1,390

27,592

13,259

13,271

Cash Flows with Off-balance Sheet Securitization Entities

The following table summarizes cash flows received and paid related to securitization entities and asset-backed financings where the
transfer is accounted for as a sale and we have a continuing involvement with the transferred consumer automotive assets (e.g., servicing) that
were outstanding during the years ended December 31, 2017, 2016, and 2015. Additionally, this table contains information regarding cash
flows received from and paid to nonconsolidated securitization entities that existed during each period.

Year ended December 31, ($ in millions)

Cash proceeds from transfers completed during the period

Cash disbursements for repurchases during the period (a)

Servicing fees

Cash flows received on retained interests in securitization entities

Other cash flows

2017

2016

2015

1,187

1,715

(491)

—

1,551
—
28
—
—

(a) During the second quarter of 2017, we elected to not renew a retail automotive credit conduit facility and also purchased the related retail automotive

loans and settled associated retained interests.

Delinquencies and Net Credit Losses

The following table represents off-balance sheet securitizations and whole-loan sales where we have continuing involvement. The table

presents quantitative information about delinquencies and net credit losses.

December 31, ($ in millions)

Off-balance sheet securitization entities

Total amount

Amount 60 days or
more past due

Net credit losses

2017

2016

2017

2016

2017

2016

Consumer automotive

1,964

2,392

Total off-balance sheet securitization entities

Whole-loan sales (a)

Total

1,964

1,399

2,392

3,164

3,363

5,556

(a) Whole-loan sales are not part of a securitization transaction, but represent consumer automotive pools of loans sold to third-party investors.

134

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

12. Servicing Activities
Automotive Finance Servicing Activities

We service consumer automotive contracts. Historically, we have sold a portion of our consumer automotive contracts. With respect to
contracts we sell, we generally retain the right to service and earn a servicing fee for our servicing function. We have concluded that the fee
we are paid for servicing consumer automotive finance receivables represents adequate compensation, and consequently, we do not recognize
a servicing asset or liability. We recognized automotive servicing fee income of $51 million, $64 million, and $45 million during the years
ended December 31, 2017, 2016, and 2015, respectively.

Automotive Finance Serviced Assets

The current unpaid principal balance and any related unamortized deferred fees and costs of total serviced automotive finance loans and

net investment in operating leases outstanding were as follows.

December 31, ($ in millions)

On-balance sheet automotive finance loans and leases

Consumer automotive

Commercial automotive

Operating leases

Other

Off-balance sheet automotive finance loans

Securitizations

Whole-loan sales

2017

2016

67,631

37,058

8,682

121

1,977

1,409

65,646

38,853

11,311

2,412

3,191

Total serviced automotive finance loans and leases

116,878

121,480

13. Premiums Receivable and Other Insurance Assets

Premiums receivable and other insurance assets consisted of the following.

December 31, ($ in millions)

Prepaid reinsurance premiums

Reinsurance recoverable on unpaid losses

Reinsurance recoverable on paid losses

Premiums receivable

Deferred policy acquisition costs

Total premiums receivable and other insurance assets

2017

2016

507

108

1,329

2,047

439

108

1,258

1,905

135

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

14. Other Assets

The components of other assets were as follows.

December 31, ($ in millions)

Property and equipment at cost

Accumulated depreciation

Net property and equipment

Nonmarketable equity investments (a)

Restricted cash collections for securitization trusts (b)

Accrued interest and rent receivables

Net deferred tax assets (c)

Goodwill (d)

Other accounts receivable

Cash reserve deposits held for securitization trusts (e)

Restricted cash and cash equivalents (f)

Fair value of derivative contracts in receivable position (g)

Cash collateral placed with counterparties

Other assets

Total other assets

2017

2016

1,064

(608)

456

1,233

812

550

461

240

116

111

901

(525)

376

1,046

1,694

476

994

240

100

184

111

167

1,522

5,663

1,371

6,854

(a)

Includes investments in FHLB stock of $745 million and $577 million at December 31, 2017, and 2016, respectively; and FRB stock of $445 million and
$435 million at December 31, 2017, and 2016, respectively.

(b) Represents cash collections from customer payments on securitized receivables. These funds are distributed to investors as payments on the related

secured debt.

(c) For further discussion regarding the impact to our deferred tax asset as a result of the Tax Act, refer to Note 23.
(d)

Includes goodwill of $27 million within our Insurance operations at both December 31, 2017, and 2016; $193 million within Corporate and Other at both
December 31, 2017, and 2016; and $20 million within Automotive Finance operations at both December 31, 2017, and 2016. As a result of our acquisition
of TradeKing, we recognized $193 million of goodwill within Corporate and Other on June 1, 2016. On August 1, 2016, we purchased assets from Blue
Yield and as a result recognized $20 million of goodwill within Automotive Finance operations. No other changes to the carrying amount of goodwill
were recorded during the years ended December 31, 2017, 2016, and 2015.

(e) Represents credit enhancement in the form of cash reserves for various securitization transactions.
(f) Primarily represents a number of arrangements with third parties where certain restrictions are placed on balances we hold due to collateral agreements

associated with operational processes with a third-party bank, or letter of credit arrangements and corresponding collateral requirements.

(g) For additional information on derivative instruments and hedging activities, refer to Note 22.

15. Deposit Liabilities

Deposit liabilities consisted of the following.

December 31, ($ in millions)

Noninterest-bearing deposits

Interest-bearing deposits

Savings and money market checking accounts

Certificates of deposit

Dealer deposits

Total deposit liabilities

2017

2016

108

49,267

43,869

46,976

31,795

167

93,256

79,022

At December 31, 2017, and December 31, 2016, certificates of deposit included $18.9 billion and $12.1 billion, respectively, of those in

denominations of $100 thousand or more. At December 31, 2017, and December 31, 2016, certificates of deposit included $5.3 billion and
$3.5 billion, respectively, of those in denominations in excess of $250 thousand federal insurance limits.

136

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table presents the scheduled maturity of total certificates of deposit at December 31, 2017.

($ in millions)

Due in 2018

Due in 2019

Due in 2020

Due in 2021

Due in 2022

Total certificates of deposit

16. Debt
Short-term Borrowings

28,764

8,613

3,579

1,418

1,495

43,869

The following table presents the composition of our short-term borrowings portfolio.

December 31, ($ in millions)

Unsecured

Secured (a)

Total

Unsecured

Secured (a)

Total

2017

2016

Demand notes

Federal Home Loan Bank

Financial instruments sold under agreements to

repurchase

Total short-term borrowings

Weighted average interest rate (b)

—

3,171

— $

3,622

— $

7,350

3,171

7,350

7,875

3,622

7,875

892

1,176

3,171

8,242

$ 11,413

3,622

9,051

12,673

1.5%

1.0%

—

(a) Refer to the section below titled Long-term Debt for further details on assets restricted as collateral for payment of the related debt.
(b) Based on the debt outstanding and the interest rate at December 31 of each year.

We periodically enter into term repurchase agreements, short-term borrowing agreements in which we sell financial instruments to one or

more investors while simultaneously committing to repurchase them at a specified future date, at the stated price plus accrued interest. As of
December 31, 2017, the financial instruments sold under agreements to repurchase consisted of $892 million of agency mortgage-backed
residential debt securities set to mature as follows: $73 million within the next 30 days, $521 million within 31 to 60 days, and $298 million
within 61 to 90 days. Refer to Note 8 and Note 26 for further details. Additionally, in December 2016, we sold asset-backed automotive
financial instruments, which are our retained interests from certain on-balance sheet securitizations, subject to a repurchase agreement in
exchange for $500 million, which was recorded as a short-term secured borrowing. The asset-backed automotive financial instruments that we
sold subject to the repurchase agreement were secured by finance receivables that we have securitized. Refer to Note 11 for additional
information on our securitization activities. This repurchase agreement was terminated in September 2017.

The primary risk associated with these repurchase agreements is that the counterparty will be unable to perform under the terms of the

contract. As the borrower, we are exposed to the excess market value of the securities pledged over the amount borrowed. Daily mark-to-
market collateral management is designed to limit this risk to the initial margin. However, should a counterparty declare bankruptcy or
become insolvent, we may incur additional delays and costs. In some instances, we may place or receive cash collateral with counterparties
under collateral arrangements associated with our repurchase agreements. At December 31, 2017, we placed cash collateral totaling $10
million and received cash collateral totaling $1 million. At December 31, 2016, we placed cash collateral totaling $45 million.

137

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Long-term Debt

The following tables present the composition of our long-term debt portfolio.

December 31, ($ in millions)

2017

Unsecured debt

Fixed rate (b)

Variable rate

Trust preferred securities (c)

Fair value adjustment (d)

Total unsecured debt

Secured debt

Fixed rate

Variable rate (e)

Fair value adjustment (d)

Total secured debt (f) (g) (h)

Total long-term debt

2016

Unsecured debt

Fixed rate (b)

Variable rate

Trust preferred securities (c)

Fair value adjustment (d)

Total unsecured debt

Secured debt

Fixed rate

Variable rate

Fair value adjustment (d)

Total secured debt (f) (g) (h)

Total long-term debt

Amount

Stated
interest rate

Weighted-average
stated interest
rate (a)

Due date
range

12,820

2,570

240

15,631

1.48–8.00%

5.68% 2018–2049

0.63–4.50%

1.96% 2018–2036

18,845

9,782

(32)

28,595

44,226

17,155

2,568

326

20,050

0.68–8.00%

5.36 % 2017–2049

17,935

16,154

(11)

34,078

54,128

0.63–4.55%

1.53 % 2017–2035

Includes subordinated debt of $1.4 billion at both December 31, 2017, and 2016.

(a) Based on the debt outstanding and the interest rate at December 31 of each year excluding any impacts of interest rate hedges.
(b)
(c) Refer to the section below titled Trust Preferred Securities for further information.
(d) Represents the fair value adjustment associated with the application of hedge accounting on certain of our long-term debt positions. Refer to Note 22 for

additional information.
Includes $8 million of long-term debt that does not have a stated interest rate.
Includes $10.2 billion and $13.3 billion of VIE secured debt at December 31, 2017, and 2016, respectively.
Includes $8.1 billion and $14.8 billion of debt outstanding from our automotive secured revolving credit facilities at December 31, 2017, and 2016,
respectively.
Includes advances from the FHLB of Pittsburgh of $10.3 billion and $6.1 billion at December 31, 2017, and 2016, respectively.

(e)
(f)
(g)

(h)

December 31, ($ in millions)

Unsecured

Secured

Total

Unsecured

Secured

Total

2017

2016

Long-term debt

Due within one year

Due after one year

Fair value adjustment

Total long-term debt

3,482

7,499

10,981

4,274

10,279

11,909

240

21,128

(32)

33,037

208

15,450

326

23,810

(11)

14,553

39,260

315

15,631

28,595

44,226

20,050

34,078

54,128

To achieve the desired balance between fixed- and variable-rate debt, we utilize interest rate swap agreements. The use of these

derivative financial instruments had the effect of synthetically converting $3.8 billion and $2.1 billion of our fixed-rate debt into variable-rate

138

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

obligations, and $3.4 billion and $132 million of our variable-rate debt into fixed-rate obligations at December 31, 2017, and 2016,
respectively.

The following table presents the scheduled remaining maturity of long-term debt at December 31, 2017, assuming no early redemptions

will occur. The actual payment of secured debt may vary based on the payment activity of the related pledged assets.

($ in millions)

Unsecured

Long-term debt

Original issue discount

Total unsecured

Secured

Long-term debt

Total long-term debt

2018

2019

2020

2021

2022

2023 and
thereafter

Fair value
adjustment

Total

3,582

1,681

2,251

637

1,067

7,408

240

$ 16,866

(100)

3,482

(39)

1,642

2,212

(43)

594

(47)

1,020

(967)

6,441

—

240

(1,235)

15,631

7,499

8,352

6,879

3,712

1,631

554

(32)

28,595

$ 10,981

9,994

9,091

4,306

2,651

6,995

208

$ 44,226

The following summarizes assets restricted as collateral for the payment of the related debt obligation primarily arising from

securitization transactions accounted for as secured borrowings and repurchase agreements.

December 31, ($ in millions)

Investment securities (b)

Mortgage assets held-for-investment and lending receivables

Consumer automotive finance receivables (b)

Commercial automotive finance receivables

Operating leases

Total assets restricted as collateral (c) (d)

Secured debt

2017

2016

Total (a)

Ally Bank

Total (a)

Ally Bank

8,371

13,579

19,787

16,567

457

7,443

13,579

6,200

16,472

—

58,761

36,837 (e) $

43,694

23,278

4,895

10,954

27,846

19,487

2,040

65,222

43,129 (e) $

4,231

10,954

5,751

19,280

913

41,129

22,149

(a) Ally Bank is a component of the total column.
(b) A portion of the restricted investment securities at December 31, 2017, and December 31, 2016, and consumer automotive finance receivables at
December 31, 2016, were restricted under repurchase agreements. Refer to the section above titled Short-term Borrowings for information on the
repurchase agreements.

(c) Ally Bank has an advance agreement with the FHLB, and had assets pledged to secure borrowings that were restricted as collateral to the FHLB totaling

$25.2 billion and $19.0 billion at December 31, 2017, and December 31, 2016, respectively. These assets were composed primarily of consumer mortgage
finance receivables and loans and investment securities. Ally Bank has access to the FRB Discount Window. Ally Bank had assets pledged and restricted
as collateral to the FRB totaling $2.3 billion and $2.4 billion at December 31, 2017, and December 31, 2016, respectively. These assets were composed of
consumer automotive finance receivables and loans and operating lease assets. Availability under these programs is only for the operations of Ally Bank
and cannot be used to fund the operations or liabilities of Ally or its subsidiaries.

(d) Excludes restricted cash and cash reserves for securitization trusts recorded within other assets on the Consolidated Balance Sheet. Refer to Note 14 for

additional information.
Includes $8.2 billion and $9.1 billion of short-term borrowings at December 31, 2017, and December 31, 2016, respectively.

(e)

Trust Preferred Securities

At December 31, 2017, we have issued and outstanding approximately $2.6 billion in aggregate liquidation preference of 8.125% Fixed

Rate/Floating Rate Trust Preferred Securities, Series 2 (Series 2 TRUPS). Each Series 2 TRUPS security has a liquidation amount of $25.
Distributions are cumulative and are payable until redemption at the applicable coupon rate. Distributions were payable at an annual rate of
8.125% payable quarterly in arrears, through but excluding February 15, 2016. From and including February 15, 2016, to but excluding
February 15, 2040, distributions will be payable at an annual rate equal to three-month London interbank offer rate plus 5.785% payable
quarterly in arrears, beginning May 15, 2016. Ally has the right to defer payments of interest for a period not exceeding 20 consecutive
quarters. The Series 2 TRUPS have no stated maturity date, but must be redeemed upon the redemption or maturity of the related debentures
(Debentures), which mature on February 15, 2040. Ally at any time on or after February 15, 2016, may redeem the Series 2 TRUPS at a
redemption price equal to 100% of the principal amount being redeemed, plus accrued and unpaid interest through the date of redemption.
The Series 2 TRUPS are generally nonvoting, other than with respect to certain limited matters. During any period in which any Series 2
TRUPS remain outstanding but in which distributions on the Series 2 TRUPS have not been fully paid, none of Ally or its subsidiaries will be
permitted to (i) declare or pay dividends on, make any distributions with respect to, or redeem, purchase, acquire or otherwise make a
liquidation payment with respect to, any of Ally’s capital stock or make any guarantee payment with respect thereto; or (ii) make any
payments of principal, interest, or premium on, or repay, repurchase or redeem, any debt securities or guarantees that rank on a parity with or
junior in interest to the Debentures with certain specified exceptions in each case.

139

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Covenants and Other Requirements

In secured funding transactions, there are trigger events that could cause the debt to be prepaid at an accelerated rate or could cause our
usage of the credit facility to be discontinued. The triggers are generally based on the financial health and performance of the servicer as well
as performance criteria for the pool of receivables, such as delinquency ratios, loss ratios, and commercial payment rates. During 2017, there
were no trigger events that resulted in the repayment of debt at an accelerated rate or impacted the usage of our credit facilities.

Funding Facilities

We utilize both committed credit facilities and other collateralized funding vehicles. The debt outstanding under our various funding

facilities is included on our Consolidated Balance Sheet.

As of December 31, 2017, Ally Bank had exclusive access to $2.7 billion of funding capacity from committed credit facilities. Funding

programs supported by the FRB and the FHLB complement Ally Bank’s private collateralized funding vehicles.

The total capacity in our committed funding facilities is provided by banks through private transactions. The committed secured funding
facilities can be revolving in nature and allow for additional funding during the commitment period, or they can be amortizing and not allow
for any further funding after the closing date. At December 31, 2017, all of our $11.9 billion of committed capacity was revolving. Our
revolving facilities generally have an original tenor ranging from 364 days to two years. As of December 31, 2017, we had $2.6 billion of
committed funding capacity from revolving facilities with a remaining tenor greater than 364 days.

Committed Funding Facilities

December 31, ($ in millions)

2017

2016

2017

2016

2017

2016

Outstanding

Unused capacity (a)

Total capacity

Bank funding

Secured (b)

Parent funding

Secured

Unsecured

1,785

3,250

890

350

2,675

3,600

6,330

—

11,550

—

2,920

—

1,975

1,250

9,250

—

13,525

1,250

Total committed facilities

8,115

14,800

3,810

3,575

11,925

18,375

(a) Funding from committed secured facilities is available on request in the event excess collateral resides in certain facilities or the extent incremental

collateral is available and contributed to the facilities.

(b) Excludes off-balance sheet credit facility amounts.

17. Accrued Expenses and Other Liabilities

The components of accrued expenses and other liabilities were as follows.

December 31, ($ in millions)

Accounts payable

Employee compensation and benefits

Reserves for insurance losses and loss adjustment expenses

Fair value of derivative contracts in payable position (a)

Deferred revenue

Cash collateral received from counterparties

Other liabilities

Total accrued expenses and other liabilities

(a) For additional information on derivative instruments and hedging activities, refer to Note 22.

2017

2016

746

248

140

556

1,780

649

232

149

546

1,737

140

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

18. Equity
Common Stock

The following table presents changes in the number of shares issued and outstanding.

Year ended December 31, (shares in thousands) (a)

2017

2016

2015

Common stock

Total issued at January 1,

New issuances

Employee benefits and compensation plans

Total issued at December 31,

Treasury balance at January 1,

Repurchase of common stock (b) (c)

Total treasury stock at December 31,

Total outstanding at December 31,

485,708

482,791

480,136

4,176

2,917

2,655

489,884

485,708

482,791

(18,707)

(34,122)

(52,830)

437,054

(811)

(17,897)

(18,707)

467,000

(41)

(769)

(811)

481,980

(a) Figures in the table may not recalculate exactly due to rounding. Number of shares issued, in treasury, and outstanding are calculated based on unrounded

numbers.
Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(b)
(c) On July 19, 2016, we announced a common stock repurchase program of up to $700 million. The program commenced in the third quarter of 2016 and
expired on June 30, 2017. On June 28, 2017, we announced a common stock repurchase program of up to $760 million. The program commenced in the
third quarter of 2017 and will expire on June 30, 2018.

19. Accumulated Other Comprehensive Loss

The following table presents changes, net of tax, in each component of accumulated other comprehensive loss.

($ in millions)

Balance at January 1, 2015

2015 net change

Balance at December 31, 2015

2016 net change

Balance at December 31, 2016

2017 net change

Balance at December 31, 2017

Unrealized
(losses) gains
on investment
securities (a)

Translation
adjustments and
net investment
hedges (b)

Cash flow
hedges (b)

Defined
benefit
pension
plans

Accumulated
other
comprehensive
loss

(21) $

(138)

(159) $

(114)

(273) $

100

(173) $

(27)

—

(88) $

(1)

(89) $

(1)

(90) $

(89) $

(66)

(165)

(231)

(110)

(341)

106

(235)

(a) Represents the after-tax difference between the fair value and amortized cost of our available-for-sale securities portfolio.
(b) For additional information on derivative instruments and hedging activities, refer to Note 22.

141

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following tables present the before- and after-tax changes in each component of accumulated other comprehensive (loss) income.

Year ended December 31, 2017 ($ in millions)

Before tax

Tax effect

After tax

Investment securities

Net unrealized gains arising during the period

237

(45)

Less: Net realized gains reclassified to income from continuing operations

105 (a)

Net change

Translation adjustments

Net unrealized gains arising during the period

Net investment hedges (c)

Net unrealized losses arising during the period

Cash flow hedges (c)

Net unrealized gains arising during the period

Defined benefit pension plans

Net unrealized gains arising during the period

Other comprehensive income

132

(10)

140

(13) (b)

(32)

(4)

(2)

—

(34)

106

Includes gains reclassified to other gain on investments, net in our Consolidated Statement of Income.
Includes amounts reclassified to income tax expense from continuing operations in our Consolidated Statement of Income.

(a)
(b)
(c) For additional information on derivative instruments and hedging activities, refer to Note 22.

Year ended December 31, 2016 ($ in millions)

Before tax

Tax effect

After tax

Investment securities

Net unrealized gains arising during the period

Less: Net realized gains reclassified to income from continuing operations

Net change

Translation adjustments

Net unrealized gains arising during the period

Less: Net realized losses reclassified to income from discontinued operations, net of tax

Net change

Net investment hedges (c)

Net unrealized gains arising during the period

Defined benefit pension plans

Net unrealized losses arising during the period

Less: Net realized losses reclassified to income from continuing operations

185 (a)

(172)

(1)

(5)

(4) (d)

Net change

Other comprehensive loss

(1)

(166)

(38) (b)

(2)

—

(2)

—

2 (b)

—

(a)
(b)
(c) For additional information on derivative instruments and hedging activities, refer to Note 22.
(d)

Includes gains reclassified to compensation and benefits expense in our Consolidated Statement of Income.

142

192

100

(6)

147

(114)

(1)

(3)

(2)

(1)

(110)

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Year ended December 31, 2015 ($ in millions)

Before tax

Tax effect

After tax

Investment securities

Net unrealized losses arising during the period

(65)

Less: Net realized gains reclassified to income from continuing operations

Net change

Translation adjustments

Net unrealized losses arising during the period

Less: Net realized gains reclassified to income from discontinued operations, net of tax

Net change

Net investment hedges (c)

Net unrealized gains arising during the period

Less: Net realized losses reclassified to income from discontinued operations, net of tax

Net change

Cash flow hedges (c)

Net unrealized gains arising during the period

Defined benefit pension plans

Net unrealized gains (losses) arising during the period

155 (a)

(220)

(56) (b)

(39)

(81)

(4)

—

(20)

(11)

(12)

(1)

—

Less: Net realized gains reclassified to income from continuing operations

1 (d)

— (b)

Net change

Other comprehensive loss

(1)

(267)

—

102

(a)
(b)
(c) For additional information on derivative instruments and hedging activities, refer to Note 22.
(d)

Includes gains reclassified to compensation and benefits expense in our Consolidated Statement of Income.

(39)

(138)

(26)

(48)

(3)

—

(1)

(165)

20. Earnings per Common Share

The following table presents the calculation of basic and diluted earnings per common share.

Year ended December 31, ($ in millions, except per share data; shares in thousands) (a)

2017

2016

2015

Net income from continuing operations

Preferred stock dividends (b)

Net income (loss) from continuing operations attributable to common stockholders

Income (loss) from discontinued operations, net of tax

Net income (loss) attributable to common stockholders

Basic weighted-average common shares outstanding (c)

Diluted weighted-average common shares outstanding (c) (d)

Basic earnings per common share

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Diluted earnings per common share

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

926

1,111

897

—

926

(30)

1,081

(44)

(2,571)

(1,674)

392

929

1,037

(1,282)

453,704

455,350

481,105

482,182

482,873

2.04

0.01

2.05

2.03

0.01

2.04

2.25

(0.09)

2.15

2.24

(0.09)

2.15

(3.47)

0.81

(2.66)

(3.47)

0.81

(2.66)

(a) Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated based on unrounded numbers.
(b) Preferred stock dividends for the year ended December 31, 2015, include $2,364 million recognized in connection with the partial redemption of the
Series G Preferred Stock and the repurchase of the Series A Preferred Stock. These dividends represent an additional return to preferred stockholders
calculated as the excess consideration paid over the carrying amount derecognized.
Includes shares related to share-based compensation that vested but were not yet issued for the years ended December 31, 2017, 2016, and 2015.

(c)
(d) Due to the antidilutive effect of the net loss from continuing operations attributable to common stockholders for the year ended December 31, 2015, basic

weighted-average common shares outstanding was used to calculate basic and diluted earnings per share.

143

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

21. Regulatory Capital and Other Regulatory Matters

The FRB and other U.S. banking agencies have adopted risk-based and leverage capital standards that establish minimum capital-to-
asset ratios for BHCs, like Ally, and depository institutions, like Ally Bank. The risk-based capital ratios are based on a banking organization’s
risk-weighted assets (RWAs), which are generally determined under the standardized approach applicable to Ally and Ally Bank by (1)
assigning on-balance sheet exposures to broad risk weight categories according to the counterparty or, if relevant, the guarantor or collateral
(with higher risk weights assigned to categories of exposures perceived as representing greater risk), and (2) multiplying off-balance sheet
exposures by specified credit conversion factors to calculate credit equivalent amounts and assigning those credit equivalent amounts to the
relevant risk weight categories. The leverage ratio, in contrast, is based on an institution’s average unweighted on-balance sheet exposures.

Ally and Ally Bank are subject to capital requirements issued by U.S. banking regulators that require us to maintain risk-based and
leverage capital ratios above minimum levels. As of January 1, 2015, Ally and Ally Bank became subject to the rules implementing the 2010
Basel III capital framework in the United States (U.S. Basel III), which generally reflects higher capital requirements, capital buffers, and
changes to regulatory capital definitions, deductions and adjustments, relative to the predecessor requirements implementing the Basel I
capital framework in the United States. Certain aspects of U.S. Basel III, including the capital buffers and certain regulatory capital
deductions, are subject to a phase-in period through December 31, 2018.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary action by regulators

that, if undertaken, could have a direct material effect on the Consolidated Financial Statements or the results of operations and financial
condition of Ally and Ally Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we and Ally
Bank must meet specific capital guidelines that involve quantitative measures of capital, assets and certain off-balance sheet items. These
measures and related classifications, which are used in the calculation of our risk-based and leverage capital ratios and those of Ally Bank, are
also subject to qualitative judgments by the regulators about the components of capital, the risk-weightings of assets and other exposures, and
other factors. The FRB also uses these ratios and guidelines as part of the capital planning and stress testing processes. In addition, in order
for Ally to maintain its status as an FHC, Ally and its bank subsidiary, Ally Bank, must remain well capitalized and well managed, as defined
under applicable laws. The well capitalized standard for insured depository institutions, such as Ally Bank, reflects the capital requirements
under U.S. Basel III.

Under U.S. Basel III, Ally and Ally Bank must maintain a minimum Common Equity Tier 1 risk-based capital ratio of 4.5%, a minimum

U.S. Basel III also revised the eligibility criteria for regulatory capital instruments and provides for the phase-out of instruments that had

Ally and Ally Bank are subject to the U.S. Basel III standardized approach for counterparty credit risk, but not to the U.S. Basel III
advanced approaches for credit risk or operational risk. Ally is also not subject to the U.S. market risk capital rule, which applies only to
banking organizations with significant trading assets and liabilities.

On November 21, 2017, the FRB and other U.S. banking agencies finalized a rule that extends the period for applying existing capital

requirements to a targeted set of items that are subject to transition provisions under U.S. Basel III. Specifically, the rule indefinitely
postpones certain remaining phase-in requirements for capital deductions and adjustments for investments in unconsolidated financial
institutions, mortgage servicing assets, and certain deferred tax assets, none of which have a material impact on our regulatory capital
position. In addition, on September 27, 2017, the FRB and other U.S. banking agencies released a proposal to simplify certain capital
requirements, including the requirements related to the above-mentioned capital deductions and adjustments. The simplification proposal
primarily applies to non-advanced approaches banking organizations such as Ally and Ally Bank. We are evaluating the effect that this
proposal would have on our regulatory capital position, but we do not expect this will have a material impact on our regulatory capital
position. In December 2017, the Basel Committee approved revisions to the global Basel III capital framework (commonly known as Basel
IV), many of which—if adopted in the United States—could heighten regulatory capital standards even more. At this time, it is not clear how
all of these proposals and revisions will be harmonized and finalized in the United States.

On March 7, 2016, Ally Bank received approval from the FRB to become a state member bank. Ally Bank is now regulated by the FRB

through the Federal Reserve Bank of Chicago, as well as the Utah Department of Financial Institutions (UDFI). As a requirement of FRB
membership, we held $445 million of FRB stock at December 31, 2017. In addition, in connection with the application for membership in the
Federal Reserve System, Ally Bank made commitments to the FRB relating to capital, liquidity, and business plan requirements. These

144

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

commitments were consistent with the prior requirements under the now-terminated Capital and Liquidity Maintenance Agreement with the
Federal Deposit Insurance Corporation (FDIC), including the requirement to maintain capital at a level such that Ally Bank’s Tier 1 leverage
ratio was at least 15%.

On August 22, 2017, banking agencies lifted the capital, liquidity, and business plan commitments that Ally Bank had made in

Compliance with capital requirements is a strategic priority for Ally. We expect to be in compliance with all applicable requirements

within the established timeframes.

The following table summarizes our capital ratios under the U.S. Basel III capital framework.

($ in millions)

Capital ratios

Common Equity Tier 1 (to risk-weighted assets)

Ally Financial Inc.

Ally Bank

Tier 1 (to risk-weighted assets)

Ally Financial Inc.

Ally Bank

Total (to risk-weighted assets)

Ally Financial Inc.

Ally Bank

Tier 1 leverage (to adjusted quarterly average

assets) (c)

Ally Financial Inc.

Ally Bank

December 31, 2017

December 31, 2016

Amount

Ratio

Amount

Ratio

Required
minimum (a)

Well-
capitalized
minimum

13,237

9.53% $

12,978

9.37%

17,059

15.04

17,888

16.70

15,628

11.25% $

15,147

17,059

15.04

17,888

17,974

12.94% $

17,419

17,886

15.77

18,458

10.93%

16.70

12.57%

17.24

4.50%

4.50

6.00%

6.00

8.00%

8.00

(b)

6.50%

6.00%

8.00

10.00%

10.00

15,628

9.53% $

15,147

9.54%

4.00%

(b)

17,059

12.87

17,888

15.21

4.00

(d)

5.00%

(a)

In addition to the minimum risk-based capital requirements for common equity Tier 1 capital, Tier 1 capital, and total capital ratios, Ally and Ally Bank
were required to maintain a minimum capital conservation buffer of 1.25% and 0.625% at December 31, 2017, and December 31, 2016, respectively,
which ultimately increases to 2.5% on January 1, 2019.

(b) Currently, there is no ratio component for determining whether a BHC is “well-capitalized.”
(c) Federal regulatory reporting guidelines require the calculation of adjusted quarterly average assets using a daily average methodology.
(d) On August 22, 2017, banking agencies lifted the capital, liquidity, and business plan commitments that Ally Bank had made in connection with its

application for membership in the Federal Reserve System, including the commitment to maintain a Tier 1 leverage ratio of at least 15%. Ally Bank now
manages its capital and liquidity subject to applicable regulatory requirements.

At December 31, 2017, Ally and Ally Bank were “well-capitalized” and met all applicable capital requirements to which each was

subject.

Capital Planning and Stress Tests

As a BHC with $50 billion or more of total consolidated assets, Ally is required to conduct semi-annual company-run stress tests, is

subject to an annual supervisory stress test conducted by the FRB, and must submit a proposed capital plan to the FRB.

145

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

proposed capital actions contained in our submission. The capital actions included a 50% increase in the quarterly cash dividend on common
stock from $0.08 per share to $0.12 per share, and a 9% increase in our share repurchase program, which has been authorized by the Ally
Board of Directors (the Board), permitting us to repurchase up to $760 million of our common stock from time to time from the third quarter
of 2017 through the second quarter of 2018. In addition, we submitted to the FRB the results of our company-run mid-cycle stress test
conducted under multiple macroeconomic scenarios and disclosed the results of this stress test under the most severe scenario on October 5,
2017, in accordance with regulatory requirements. Additionally, in connection with the 2017 CCAR process, on January 10, 2018, the Board
declared a quarterly cash dividend payment of $0.13 per share on all common stock, representing a $0.01 per share increase relative to the
prior quarter.

The following table presents information related to our common stock for each quarter since the commencement of our common stock

repurchase programs and initiation of a quarterly cash dividend on common stock.

($ in millions, except per share data; shares in thousands)

Common stock repurchased during period (a)

Approximate dollar value

Number of shares

Number of common shares outstanding

Beginning of period

End of period

4th quarter
2017

3rd quarter
2017

2nd quarter
2017

1st quarter
2017

4th quarter
2016

3rd quarter
2016

190 $

204 $

169 $

167 $

7,033

8,507

10,485

8,097

8,745

159

8,298

443,796

437,054

452,292

443,796

462,193

452,292

467,000

462,193

475,470

467,000

483,753

475,470

Cash dividends declared per common share (b)

0.12 $

0.08 $

0.08

Includes shares of common stock withheld to cover income taxes owed by participants in our share-based incentive plans.

(a)
(b) On January 10, 2018, the Board declared a quarterly cash dividend payment of $0.13 per share on all common stock, a $0.01 per share increase relative to

our prior quarterly cash dividend. Refer to Note 32 for further information regarding this common stock dividend.

Our ability to make capital distributions, including our ability to pay dividends or repurchase shares of our common stock, will continue

In January 2017, the FRB amended the capital planning and stress testing rules, effective for the 2017 cycle and beyond. As a result of

this amendment, the FRB may no longer object to the capital plan of a large and noncomplex BHC, like Ally, on the basis of qualitative
deficiencies in its capital planning process. Instead, the qualitative assessment of Ally’s capital planning process is now conducted outside of
CCAR through the supervisory review process. The amendment also decreased the de minimis threshold for the amount of capital that Ally
could distribute to stockholders outside of an approved capital plan without seeking prior approval of the FRB, and modified Ally’s reporting
requirements to reduce unnecessary burdens.

Depository Institutions

Ally Bank is a member of the Federal Reserve System and is subject to regulation, supervision, and examination by the FRB and the
UDFI. Ally Bank’s deposits are insured by the FDIC, and Ally Bank is required to file periodic reports with the FDIC concerning its financial
condition. Total assets of Ally Bank were $137.4 billion and $123.5 billion at December 31, 2017, and 2016, respectively. Federal and Utah
law place a number of conditions, restrictions, and limitations on dividends and other capital distributions that may be paid by Ally Bank to
Ally. Dividends or other distributions made by Ally Bank to Ally were $3.3 billion in 2017. No dividends were paid in 2016.

The FRB requires banks to maintain minimum average reserve balances. The amount of the required reserve balance for Ally Bank was

$370 million and $149 million at December 31, 2017, and 2016, respectively.

Ally Bank is required to satisfy regulatory net worth requirements. Failure to meet minimum capital requirements can initiate certain
mandatory actions by federal, state, and foreign agencies that could have a material effect on our results of operations and financial condition.
Ally Bank was in compliance with these requirements at December 31, 2017.

Insurance Companies

Certain of our Insurance operations are subject to certain minimum aggregate capital requirements, net asset and dividend restrictions
under applicable state and foreign insurance laws, and the rules and regulations promulgated by various U.S. and foreign regulatory agencies.
Under various state and foreign insurance regulations, dividend distributions may be made only from statutory unassigned surplus, with
approvals required from the regulatory authorities for dividends in excess of certain statutory limitations. At December 31, 2017, the
maximum dividend that could be paid by the U.S. insurance subsidiaries over the next twelve months without prior statutory approval was
$87 million.

146

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

22. Derivative Instruments and Hedging Activities

We enter into interest rate, foreign-currency, and equity swaps, futures, forwards, and options in connection with our market risk
management activities. Derivative instruments are used to manage interest rate risk relating to specific groups of assets and liabilities,
including available-for-sale securities, automotive loan assets, and debt. We use foreign exchange contracts to mitigate foreign-currency risk
associated with foreign-currency-denominated debt, foreign exchange transactions, and our net investment in foreign subsidiaries. In addition,
we also enter into equity option contracts to manage our exposure to the equity markets. Our primary objective for utilizing derivative
financial instruments is to manage interest rate risk associated with our fixed- and variable-rate assets and liabilities, foreign exchange risks
related to our foreign-currency denominated assets and liabilities, and market risks related to our investment portfolio and certain of our
executive share-based compensation plans.

Interest Rate Risk

We monitor our mix of fixed- and variable-rate assets and liabilities. We may enter into interest rate swaps, forwards, futures, options,
and swaptions to achieve our desired mix of fixed- and variable-rate assets and liabilities. We execute interest rate swaps, forwards, futures,
and options to modify our exposure to interest rate risk by converting certain fixed-rate instruments to a variable-rate and certain variable-rate
instruments to a fixed-rate. We use a mix of both derivatives that qualify for hedge accounting treatment and economic hedges.

Derivatives qualifying for hedge accounting can include receive-fixed swaps designated as fair value hedges of specific fixed-rate
unsecured debt obligations, receive-fixed swaps designated as fair value hedges of specific fixed-rate FHLB advances, fair value hedges of
U.S. Treasury positions within our available-for-sale portfolio, and pay-fixed swaps designated as fair value hedges of specific portfolios of
fixed-rate held-for-investment retail automotive loan assets. Other derivatives qualifying for hedge accounting consist of pay-fixed swaps
designated as cash flow hedges of the expected future cash flows in the form of interest payments on certain variable-rate borrowings. As of
December 31, 2017, there were no open hedges related to our held-for-investment retail automotive loan assets or U.S. Treasury positions.

We may also execute economic hedges, which consist of interest rate swaps and interest rate caps held to mitigate interest rate risk
associated with our debt portfolio. We may also use interest rate swaps to economically hedge our net fixed-versus-variable interest rate
exposure. We enter into economic hedges in the form of short-dated, exchange-traded Eurodollar futures to hedge the interest rate exposure of
our fixed-rate automotive loans, as well as forwards, options, and swaptions to economically hedge our net fixed-versus-variable interest rate
exposure.

We also enter into interest rate lock commitments and forward-sale commitments that are executed as part of our mortgage business that

meet the accounting definition of a derivative.

Foreign Exchange Risk

We enter into derivative financial instrument contracts to mitigate the risk associated with variability in cash flows related to our various

foreign-currency exposures.

We enter into foreign-currency forwards with external counterparties as net investment hedges of foreign exchange exposure on our
investments in foreign subsidiaries. Our equity is impacted by the cumulative translation adjustments resulting from the translation of foreign
subsidiary results; this impact is reflected in our accumulated other comprehensive loss. We also periodically enter into foreign-currency
forwards to economically hedge our foreign-denominated debt, our centralized lending program, and foreign-denominated third-party loans.
These foreign currency forwards that are used as economic hedges are recorded at fair value with changes recorded as income offsetting the
gains and losses on the associated foreign-currency transactions.

Market Risk

We enter into equity options to economically hedge our exposure to the equity markets. We purchase options to assume a long position

on certain equities and write options to assume a short position. We did not hold any equity options at December 31, 2017.

Counterparty Credit Risk

Derivative financial instruments contain an element of credit risk if counterparties are unable to meet the terms of the agreements. Credit

risk associated with derivative financial instruments is measured as the net replacement cost should the counterparties that owe us under the
contract completely fail to perform under the terms of those contracts, assuming no recoveries of underlying collateral as measured by the
market value of the derivative financial instrument.

To mitigate the risk of counterparty default, we maintain collateral agreements with certain counterparties. The agreements generally
require both parties to post collateral in the event the fair values of the derivative financial instruments meet posting thresholds established
under the agreements. In the event that either party defaults on the obligation, the secured party may seize the collateral. Generally, our
collateral arrangements are bilateral such that we and the counterparty post collateral for the value of our total obligation to each other.
Contractual terms provide for standard and customary exchange of collateral based on changes in the market value of the outstanding
derivatives. The securing party posts additional collateral when their obligation rises or removes collateral when it falls. These payments are
characterized as collateral for over-the-counter (OTC) derivatives.

147

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

We execute certain derivatives such as interest rate swaps with clearinghouses, which requires us to post collateral. For these

clearinghouse derivatives, these payments are recognized as settlements rather than collateral.

Certain derivative instruments contain provisions that require us to either post additional collateral or immediately settle any outstanding
liability balances upon the occurrence of a specified credit risk-related event. No such specified credit risk related events occurred during the
years ended December 31, 2017, and 2016.

We placed cash collateral totaling $20 million and securities collateral totaling $97 million at December 31, 2017, and $122 million and
$72 million at December 31, 2016, respectively, in accounts maintained by counterparties. This amount primarily relates to collateral posted
to support our derivative positions. This amount also excludes cash and securities pledged as collateral under repurchase agreements. At
December 31, 2017, and December 31, 2016, we placed cash collateral totaling $10 million and $45 million, respectively, with counterparties
under collateral arrangements associated with repurchase agreements. Refer to Note 16 for details on the repurchase agreements. The
receivables for cash collateral placed are included on our Consolidated Balance Sheet in other assets.

We received cash collateral from counterparties totaling $17 million and $10 million at December 31, 2017, and December 31, 2016,

respectively, primarily to support these derivative positions. This amount also excludes cash and securities pledged as collateral under
repurchase agreements. At December 31, 2017, we received cash collateral totaling $1 million from counterparties under collateral
arrangements associated with repurchase agreements. Refer to Note 16 for details on the repurchase agreements. The payables for cash
collateral received are included on our Consolidated Balance Sheet in accrued expenses and other liabilities. In certain circumstances, we
receive or post securities as collateral with counterparties. We do not record collateral received on our Consolidated Balance Sheet unless
certain conditions are met. At December 31, 2017, and December 31, 2016, we received noncash collateral of $2 million and $6 million,
respectively. Included in these amounts is noncash collateral where we have been granted the right to sell or pledge the underlying assets. We
have not sold or pledged any of the noncash collateral received under these agreements.

148

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Balance Sheet Presentation

The following table summarizes the fair value amounts of derivative instruments reported on our Consolidated Balance Sheet. The fair

value amounts are presented on a gross basis, are segregated by derivatives that are designated and qualifying as hedging instruments or those
that are not, and are further segregated by type of contract within those two categories. Derivative contracts in a receivable and payable
position exclude open trade equity on derivatives cleared through central clearing counterparties. Any associated collateral exchanged with
our central clearing counterparties are treated as settlements of the derivative exposure, rather than collateral. Such payments are recognized
as settlements of the derivatives contracts in a receivable and payable position on our Consolidated Balance Sheet. Notional amounts are
reference amounts from which contractual obligations are derived and are not recorded on the balance sheet. In our view, derivative notional
is not an accurate measure of our derivative exposure when viewed in isolation from other factors, such as market rate fluctuations and
counterparty credit risk.

December 31, ($ in millions)

Derivatives designated as accounting hedges

Interest rate contracts

Swaps

Foreign exchange contracts

Forwards

Total derivatives designated as accounting hedges

Derivatives not designated as accounting hedges

Interest rate contracts

Swaps

Futures and forwards

Written options

Purchased options

Total interest rate risk

Foreign exchange contracts

Futures and forwards

Total foreign exchange risk

Equity contracts

Written options

Purchased options

Total equity risk

Total derivatives not designated as accounting

hedges

Total derivatives

2017

2016

Derivative contracts in a

receivable
position (a)

payable
position (b)

Notional
amount

receivable
position (a)

payable
position (b)

Notional
amount

— $

6,915

4,731

—

136

7,051

—

8,327

8,237

16,587

124

—

16,711

23,762

—

171

4,902

137

—

14,518

14,517

29,172

—

29,264

34,166

(a) Derivative contracts in a receivable position are classified as other assets on the Consolidated Balance Sheet, and include accrued interest of $0 million

and $7 million at December 31, 2017, and December 31, 2016, respectively.

(b) Derivative contracts in a liability position are classified as accrued expenses and other liabilities on the Consolidated Balance Sheet, and include accrued

interest of $0 million and $1 million at December 31, 2017, and December 31, 2016, respectively.

149

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Statement of Income Presentation

The following table summarizes the location and amounts of gains and losses on derivative instruments reported in our Consolidated

Statement of Income.

Year ended December 31, ($ in millions)

Derivatives qualifying for hedge accounting

Gain (loss) recognized in earnings on derivatives

Interest rate contracts

Interest and fees on finance receivables and loans (a)

Interest and dividends on investment securities

Interest on long-term debt (b)

(Loss) gain recognized in earnings on hedged items

Interest rate contracts

Interest and fees on finance receivables and loans (c)

Interest and dividends on investment securities

Interest on long-term debt (d)

Total derivatives qualifying for hedge accounting

Derivatives not designated as accounting hedges

Gain (loss) recognized in earnings on derivatives

Interest rate contracts

Gain on mortgage and automotive loans, net

Other income, net of losses

Total interest rate contracts

Foreign exchange contracts (e)

Interest on long-term debt

Other income, net of losses

Total foreign exchange contracts

Equity contracts

Compensation and benefits expense

Total equity contracts

Loss recognized in earnings on derivatives

2017

2016

2015

(25)

(3)

(1)

(3)

(2)

—

(7)

—

(2) $

—

(70)

(7)

—

(2)

(1)

—

(6) $

(8) $

(9)

—

(30)

(2)

(17)

(19)

(139)

(127)

(10)

(121)

(a) Amounts exclude losses related to interest for qualifying accounting hedges of retail automotive loans held-for-investment, which are primarily offset by
the fixed coupon payments of the loans. The losses were $1 million, $18 million, and $64 million for the years ended December 31, 2017, 2016, and
2015, respectively.

(b) Amounts exclude gains related to interest for qualifying accounting hedges of unsecured debt, which are primarily offset by the fixed coupon payment on
the long-term debt. The gains were $24 million, $40 million, and $97 million for the years ended December 31, 2017, 2016, and 2015, respectively.
Amounts also exclude gains related to interest for qualifying accounting hedges of secured debt (FHLB advances), which are primarily offset by the fixed
coupon payment on the long-term debt. The gains were $3 million, $5 million, and $1 million for the years ended December 31, 2017, 2016, and 2015,
respectively.

(c) Amounts exclude losses related to amortization of deferred loan basis adjustments on the de-designated hedged item of $21 million, $20 million, and $8

million for the years ended December 31, 2017, 2016, and 2015, respectively.

(d) Amounts exclude gains related to amortization of deferred debt basis adjustments on the de-designated hedged item of $77 million, $84 million, and $73
million for the years ended December 31, 2017, 2016, and 2015, respectively. Amounts also exclude losses related to amortization of deferred debt basis
adjustments (FHLB advances) on the de-designated hedge item of $2 million for the year ended December 31, 2017.

(e) Amounts exclude gains and losses related to the revaluation of the related foreign-denominated debt or receivable. Gains of $9 million, $0 million, and

$132 million were recognized for the years ended December 31, 2017, 2016, and 2015, respectively.

150

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table summarizes derivative instruments used in cash flow and net investment hedge accounting relationships.

Year ended December 31, ($ in millions)

2017

2016

2015

Cash flow hedges

Interest rate contracts

Gain recognized in other comprehensive loss

Net investment hedges

Foreign exchange contracts

Loss reclassified from accumulated other comprehensive loss to income from discontinued

operations, net

(Loss) gain recognized in other comprehensive loss (a)

— $

(10) $

— $

(4)

(a) The amounts represent the effective portion of net investment hedges. There are offsetting amounts recognized in accumulated other comprehensive loss
related to the revaluation of the related net investment in foreign operations, including the tax impacts of the hedge and related net investment, as
disclosed separately in Note 19. There were gains of $12 million and $4 million for the years ended December 31, 2017, and 2016, respectively, and
losses of $59 million for the year ended December 31, 2015.

23. Income Taxes

The significant components of income tax expense from continuing operations were as follows.

Total income tax expense from continuing operations

A reconciliation of income tax expense from continuing operations with the amounts at the statutory U.S. federal income tax rate is

Year ended December 31, ($ in millions)

Current income tax (benefit) expense

U.S. federal

Foreign

State and local

Total current expense

Deferred income tax expense (benefit)

U.S. federal

Foreign

State and local

Total deferred expense

shown in the following table.

Year ended December 31, ($ in millions)

Statutory U.S. federal tax expense

Change in tax resulting from

Valuation allowance change, excluding expirations

Tax credits, excluding expirations

State and local income taxes, net of federal income tax benefit (a)

Nondeductible expenses

Changes in unrecognized tax expenses (benefits) (b)

Other, net

2017

2016

2015

(17) $

— $

566

—

(27)

539

581

423

—

453

470

—

454

487

496

2017

2016

2015

527

553

488

(49)

(12)

(16)

462

119

581

(15)

(161)

—

470

—

470

(25)

(13)

(5)

(1)

496

—

496

Total income tax expense from continuing operations exclusive of tax reform impacts

Tax law enactment

Total income tax expense from continuing operations inclusive of tax reform impacts

(a) Amount for 2017 includes state deferred tax adjustments primarily offset in the valuation allowance change caption.
(b) Amount for 2016 is primarily the result of a U.S. tax reserve release in the second quarter of 2016 related to a prior-year federal return.

On December 22, 2017, the Tax Act was enacted. The Tax Act makes broad and complex changes to the U.S. tax code that impact our

year ended December 31, 2017, and forward, including, but not limited to (1) reducing the U.S. federal corporate tax rate from 35 percent to
21 percent; (2) allowing bonus depreciation for full expensing of qualified property; (3) eliminating the corporate alternative minimum tax
(AMT) and changing how existing AMT credit carryforwards can be realized; and (4) eliminating the deduction for FDIC premiums.

151

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

As a result of the Tax Act, we recorded net tax expense of $119 million due to an increase in the valuation allowance of $549 million

primarily attributable to foreign tax credit carryforwards and a decrease to the value of the low income housing tax credit investments of
$7 million, offset by adjustments to deferred tax assets and liabilities of $421 million and an increase to income tax receivable of $16 million
due to refundable AMT credit carryforwards. As of December 31, 2017, we have completed our accounting for the income tax effects of the
Tax Act enactment. While the Tax Act negatively impacted earnings in the fourth quarter of 2017, the lower corporate tax rate is expected to
be a significant ongoing benefit to Ally.

For the year ended December 31, 2017, consolidated income tax expense from continuing operations was largely driven by tax
attributable to pretax earnings for the year increased by the aforementioned Tax Act enactment charge, partially offset by changes to our
valuation allowance balances related to capital-in-nature deferred tax assets and foreign tax credit carryforwards. For the year ended
December 31, 2016, consolidated income tax expense from continuing operations was largely driven by tax attributable to pretax earnings for
the year and the establishment of a valuation allowance on capital loss carryforwards, offset by a reduction in the liability for unrecognized
tax benefits that resulted from the completion of a U.S. federal audit related to a prior tax year. For the year ended December 31, 2015,
consolidated income tax expense from continuing operations was largely driven by tax attributable to pretax earnings for the year, offset by
tax benefits recognized from the release of our valuation allowance on capital loss carryforwards utilized against current year capital gains.

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future
realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credit carryforwards,
state net operating loss carryforwards, and state capital loss carryforwards will not be realized. In recognition of this risk, we continue to
provide a partial valuation allowance on the deferred tax assets relating to these carryforwards.

The significant components of deferred tax assets and liabilities are reflected in the following table.

December 31, ($ in millions)

Deferred tax assets

Tax credit carryforwards

Adjustments to loan value

Tax loss carryforwards

State and local taxes

Unearned insurance premiums

Hedging transactions

Other

Gross deferred tax assets

Valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities

Lease transactions

Deferred acquisition costs

Debt transactions

Other

Gross deferred tax liabilities

Net deferred tax assets (a) (b)

2017

2016

2,002

1,987

450

302

200

108

3,196

(1,123)

2,073

1,212

269

1,620

453

546

936

162

141

123

208

4,103

(646)

3,457

1,789

424

161

107

2,481

976

(a) Amounts include $461 million and $994 million of net deferred tax assets included in other assets on our Consolidated Balance Sheet for tax jurisdictions
in a total net deferred tax asset position and $8 million and $18 million included in accrued expenses and other liabilities on our Consolidated Balance
Sheet for tax jurisdictions in a total net deferred tax liability position at December 31, 2017, and 2016, respectively.

(b) Amount for 2017 decreased $128 million due to the Tax Act, which is composed of adjustments to our deferred tax assets and liabilities of $421 million

and an increase in the valuation allowance of $549 million primarily attributable to foreign tax credit carryforwards. The additional decrease of $395
million primarily resulted from the monetization of deferred tax assets against taxes generated from pretax earnings for the year, offset by deferred tax
asset builds stemming from tax credit generation, including low income housing tax credits.

152

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following table summarizes net deferred tax assets including related valuation allowances at December 31, 2017.

($ in millions)

Tax credit carryforwards

Foreign tax credits

General business credits

Alternative minimum tax (AMT) credits

Total tax credit carryforwards

Tax loss carryforwards

Net operating losses — federal

Net operating losses — state

Capital losses — state

Total tax loss carryforwards

Other net deferred tax liabilities (b)

Deferred tax
asset (liability)

Valuation
allowance

Net deferred tax
asset (liability)

Years of
expiration

1,772

(983)

213

2,002

302

253 (a)

2 (a)

557

(983)

—

(983)

—

(135)

(2)

(137)

(3)

2018–2027

2031–2037

n/a

2027–2036

2018–2037

2018–2027

n/a

789

213

1,019

302

118

—

420

(986)

453

Net deferred tax assets

1,576

(1,123) (c) $

(a) State net operating loss and capital loss carryforwards are included in the state and local taxes and other liabilities totals disclosed in our deferred

inventory table above.

(b) Other net deferred tax liabilities are composed of other liabilities and assets. A portion of these assets are subject to a valuation allowance.
(c)

Includes the valuation allowance impact of the Tax Act of $549 million primarily related to foreign tax credit carryforwards. This valuation allowance
impact of the Tax Act is disclosed in the tax law enactment caption in the reconciliation of income tax expense table above.

As part of the Tax Act, a Deemed Repatriation Transition Tax (the Transition Tax) was enacted. The Transition Tax is a tax on
previously-untaxed accumulated and current earnings and profits (E&P) of certain foreign subsidiaries. To determine the amount of the
Transition Tax, we had to determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the
amount of non-U.S. income taxes paid on such earnings. Given our consolidated accumulated E&P deficit position, we determined there is no
liability related to the Transition Tax. As of December 31, 2017, we continue to not assert that foreign earnings are indefinitely reinvested
outside of the United States. Deferred tax liabilities for incremental U.S. tax that stem from temporary differences related to investments in
foreign subsidiaries or corporate joint ventures are negligible and have been recognized as of December 31, 2017.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits.

($ in millions)

Balance at January 1,

Additions based on tax positions related to the current year

Additions for tax positions of prior years

Reductions for tax positions of prior years

Settlements

Expiration of statute of limitations

Balance at December 31,

2017

2016

2015

185

191

—

(1)

—

(1)

—

(182)

(1)

—

(10)

(3)

185

Included in the unrecognized tax benefits balances are some items, the recognition of which would not affect the effective tax rate, such

as the tax effect of certain temporary differences and the portion of gross state unrecognized tax benefits that would be offset by the tax
benefit of the associated federal deduction. At December 31, 2017, 2016, and 2015, the balance of unrecognized tax benefits that, if
recognized, would affect our effective tax rate were $12 million, $9 million, and $177 million, respectively.

We recognize accrued interest and penalties related to uncertain income tax positions in interest expense and other operating expenses,

respectively. The cumulative accrued balance for interest and penalties was less than $1 million at December 31, 2017, $1 million at
December 31, 2016, and $2 million at December 31, 2015. For each of the years ended December 31, 2017, 2016, and 2015, interest and
penalties of $1 million or less were accrued.

It is reasonably possible that the unrecognized tax benefits will decrease by up to $15 million over the next twelve months if certain tax

matters ultimately settle with the applicable taxing jurisdiction.

We file tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. Our most significant operations remaining

following our divestitures of various international operations are the United States and Canada. The oldest tax years that remain subject to
examination for those jurisdictions are 2012 and 2011, respectively.

153

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

24. Share-based Compensation Plans

We grant Restricted Stock Units (RSUs) and Performance Share Units (PSUs) to certain employees under the Ally Financial Inc.
Incentive Compensation Plans (AICPs). The AICPs allow us to grant an array of equity-based and cash incentive awards to our named
executive officers and other employees. Each of our approved compensation plans and awards are designed to provide certain of our
employees with an opportunity to share in the future growth of value at Ally, which is necessary to attract and retain key talent. In 2017, we
received stockholder approval on amendments to our AICPs. At December 31, 2017, we had 37,778,224 shares available for future grants of
incentive-based equity remaining under the AICPs.

Our share-based compensation awards generally settle in Ally common stock and are classified as equity awards under GAAP. The cost

of the awards are ratably charged to compensation and benefits expense in our Consolidated Statement of Income over their applicable service
period and are based on the grant date fair value of Ally common stock.

PSU and RSU Awards

PSUs are payable contingent upon Ally achieving certain predefined performance objectives over a two-year measurement period and a

three-year service condition. The number of awards payable upon vest can range from zero to 150% of the grant amount. The PSU awards
settle in the form of Ally common stock. We accrue dividend equivalents for our PSUs that are paid upon vesting and based on the number of
awards payable upon vest.

RSUs are awarded to employees at no cost to the recipient upon their grant. The compensation costs related to these awards are ratably

charged to expense over the applicable service period. The majority of the existing RSUs settle in the form of Ally common stock. RSUs
granted in 2015 generally vested ratably over a two-year period starting on the date the award was issued and converted into shares of
common stock at the end of the two-year period. RSU awards granted in 2017 and 2016 generally vest one third ratably each year over a
three-year period starting on the date the award was issued and are converted into shares of common stock as of the vesting date. We accrue
dividend equivalents for our RSUs that are paid upon vesting. Ally has awards that vested but were not yet distributed for the years ended
December 31, 2017, 2016, and 2015. The following table presents the changes in outstanding non-vested PSUs and RSUs activity during
2017.

(in thousands, except per share data)

RSUs and PSUs

Outstanding non-vested at January 1, 2017

Granted

Vested

Forfeited

Outstanding non-vested at December 31, 2017

Number of
units

Weighted-average
grant date fair
value per share

5,443

3,280

(3,043)

(88)

5,592

19.00

21.30

19.84

19.39

19.89

We recognized expense related to PSU and RSU awards of $60 million, $54 million, and $49 million for the years ended December 31,

2017, 2016, and 2015, respectively.

25. Fair Value
Fair Value Measurements

For purposes of this disclosure, fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a

liability (exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement
date under current market conditions. Fair value is based on the assumptions we believe market participants would use when pricing an asset
or liability. Additionally, entities are required to consider all aspects of nonperformance risk, including the entity’s own credit standing, when
measuring the fair value of a liability.

GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest

priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e.,
unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its
valuation. The following is a description of the three hierarchy levels.

Level 1

Level 2

Inputs are quoted prices in active markets for identical assets or liabilities at the measurement date. Additionally, the entity
must have the ability to access the active market, and the quoted prices cannot be adjusted by the entity.

Inputs are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive
markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable
market data by correlation or other means for substantially the full term of the assets or liabilities.

154

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Level 3

Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best
assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are
valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment
or estimation.

Transfers

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfer occurred.

Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the

valuation models, key inputs to those models, and significant assumptions utilized.

•

Available-for-sale securities — All classes of available-for-sale securities are carried at fair value based on observable market
prices, when available. If observable market prices are not available, our valuations are based on internally developed discounted
cash flow models (an income approach) that use a market-based discount rate and consider recent market transactions, experience
with similar securities, current business conditions, and analysis of the underlying collateral, as available. To estimate cash flows,
we are required to utilize various significant assumptions including market observable inputs (e.g., forward interest rates) and
internally developed inputs (including prepayment speeds, delinquency levels, and credit losses).

Interests retained in financial asset sales — Includes certain noncertificated interests retained from the sale of automotive finance
receivables. Due to inactivity in the market, valuations are based on internally developed discounted cash flow models (an income
approach) that use a market-based discount rate; therefore, we classified these assets as Level 3. The valuation considers recent
market transactions, experience with similar assets, current business conditions, and analysis of the underlying collateral, as
available. To estimate cash flows, we utilize various significant assumptions, including market observable inputs (e.g., forward
interest rates) and internally developed inputs (e.g., prepayment speeds, delinquency levels, and credit losses).

• Derivative instruments — We enter into a variety of derivative financial instruments as part of our risk management strategies.

Certain of these derivatives are exchange traded, such as Eurodollar futures, options of Eurodollar futures, and equity options. To
determine the fair value of these instruments, we utilize the quoted market prices for the particular derivative contracts; therefore,
we classified these contracts as Level 1.

We also execute OTC and centrally-cleared derivative contracts, such as interest rate swaps, swaptions, foreign-currency

denominated forward contracts, prepaid equity forward contracts, caps, floors, and agency to-be-announced securities. For OTC
contracts, we utilize third-party-developed valuation models that are widely accepted in the market to value these OTC derivative
contracts. The specific terms of the contract and market observable inputs (such as interest rate forward curves, interpolated
volatility assumptions, or equity pricing) are used in the model. We classified these OTC derivative contracts as Level 2 because all
significant inputs into these models were market observable. For centrally-cleared contracts, we utilize unadjusted prices obtained
from the clearing house as the basis for valuation, and they are also classified as Level 2.

We also enter into interest rate lock commitments and forward-sale commitments that are executed as part of our mortgage

business, certain of which meet the accounting definition of a derivative and therefore are recorded as derivatives on our
Consolidated Balance Sheet. Because these derivatives are valued using internal pricing models with unobservable inputs, they are
classified as Level 3.

We are required to consider all aspects of nonperformance risk, including our own credit standing, when measuring fair value

of a liability. We reduce credit risk on the majority of our derivatives by entering into legally enforceable agreements that enable the
posting and receiving of collateral associated with the fair value of our derivative positions on an ongoing basis. In the event that we
do not enter into legally enforceable agreements that enable the posting and receiving of collateral, we will consider our credit risk
and the credit risk of our counterparties in the valuation of derivative instruments through a credit valuation adjustment (CVA), if
warranted. The CVA calculation utilizes the credit default swap spreads of the counterparty.

155

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Recurring Fair Value

The following tables display the assets and liabilities measured at fair value on a recurring basis including financial instruments elected

for the fair value option. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial
instruments. The tables below display the hedges separately from the hedged items; therefore, they do not directly display the impact of our
risk management activities.

December 31, 2017 ($ in millions)

Assets

Investment securities

Available-for-sale securities

Debt securities

U.S. Treasury

U.S. States and political subdivisions

Foreign government

Agency mortgage-backed residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

Total debt securities

Equity securities (a)

Total available-for-sale securities

Mortgage loans held-for-sale (b)

Interests retained in financial asset sales

Derivative contracts in a receivable position

Interest rate

Total derivative contracts in a receivable position

Total assets

Liabilities

Accrued expenses and other liabilities

Derivative contracts in a payable position

Interest rate
Foreign currency

Total derivative contracts in a payable position

Total liabilities

(a) Our investment in any one industry did not exceed 14%.
(b) Carried at fair value due to fair value option elections.

Recurring fair value measurements

Level 1

Level 2

Level 3

Total

1,777

— $

1,777

—

1,785

518

2,303

—

854

146

14,291

2,494

541

936

1,256

20,518

—

20,518

—

854

154

14,291

2,494

541

936

1,256

22,303

518

22,821

2,303

20,556

22,878

— $
—

—

— $

(39) $
(2)

(41)

(41) $

— $
—

—

— $

(39)
(2)

(41)

156

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

December 31, 2016 ($ in millions)

Assets

Investment securities

Available-for-sale securities

Debt securities

U.S. Treasury

U.S. States and political subdivisions

Foreign government

Agency mortgage-backed residential

Mortgage-backed residential

Mortgage-backed commercial

Asset-backed

Corporate debt

Total debt securities

Equity securities (a)

Total available-for-sale securities

Other assets

Interests retained in financial asset sales

Derivative contracts in a receivable position

Interest rate

Foreign currency

Other

Total derivative contracts in a receivable position

Total assets

Liabilities

Accrued expenses and other liabilities

Derivative contracts in a payable position

Interest rate

Other

Total derivative contracts in a payable position

Total liabilities

(a) Our investment in any one industry did not exceed 14%.

Recurring fair value measurements

Level 1

Level 2

Level 3

Total

1,620

— $

1,620

—

1,631

595

2,226

—

782

151

10,290

2,097

537

1,400

1,443

16,700

—

16,700

—

2,227

16,794

—

782

162

10,290

2,097

537

1,400

1,443

18,331

595

18,926

19,050

— $

(94) $

— $

(1)

—

(94)

—

(1) $

(94) $

— $

(94)

(1)

(95)

157

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The following tables present the reconciliation for all Level 3 assets and liabilities measured at fair value on a recurring basis. We often

economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The Level 3 items
presented below may be hedged by derivatives and other financial instruments that are classified as Level 1 or Level 2. Thus, the following
tables do not fully reflect the impact of our risk management activities.

Level 3 recurring fair value measurements

Net realized/unrealized
gains

Fair value at
Jan. 1, 2017

included
in
earnings

included
in OCI

Purchases Sales

Issuances Settlements

Net unrealized
gains included
in earnings
still held at
December 31,
2017

Fair value at
December 31,
2017

($ in millions)

Assets

Mortgage loans held-for-sale (a)

Other assets

Interests retained in financial asset sales

Derivative assets

Total assets

— $

2 (b) $

— $

137 $(126) $

— $

13 $

—

1 (c)

1 (b)

—

(33)

—

29 $

— $

137 $(118) $

— $

(33) $

19 $

—

(a) Carried at fair value due to fair value option elections.
(b) Reported as gain on mortgage and automotive loans, net, in the Consolidated Statement of Income
(c) Reported as other income, net of losses, in the Consolidated Statement of Income.

Level 3 recurring fair value measurements

Net realized/unrealized
gains

Fair value at
Jan. 1, 2016

included
in
earnings

included
in OCI

Purchases

Sales

Issuances

Settlements

Net unrealized
gains included
in earnings still
held at
December 31,
2016

Fair value at
December 31,
2016

($ in millions)

Assets

Other assets

Interests retained in financial asset sales

Total assets

40 $

4 (a)

— $

9 $

— $

(24) $

29 $

—

(a) Reported as other income, net of losses, in the Consolidated Statement of Income.

Nonrecurring Fair Value

We may be required to measure certain assets and liabilities at fair value from time to time. These periodic fair value measures typically

result from the application of lower-of-cost or fair value accounting or certain impairment measures. These items would constitute
nonrecurring fair value measures.

The following tables display the assets and liabilities measured at fair value on a nonrecurring basis.

December 31, 2017 ($ in millions)

Level 1 Level 2 Level 3

Total

Nonrecurring fair value
measurements

Lower-of-
cost or
fair value
or valuation
reserve
allowance

Total gain
(loss)
included in
earnings for
the year
ended

Assets

Loans held-for-sale, net

Commercial finance receivables and loans, net (b)

Automotive

Other

Total commercial finance receivables and loans, net

Other assets

Repossessed and foreclosed assets (c)

Other

Total assets

$ — $ — $

—

n/m (a)

—

$ — $ — $

136

(3)

(12)

(15)

(1)

—

(16)

n/m (a)

n/m

n/m = not meaningful
(a) We consider the applicable valuation or loan loss allowance to be the most relevant indicator of the impact on earnings caused by the fair value

measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the
respective valuation or loan loss allowance.

(b) Represents the portion of the portfolio specifically impaired during 2017. The related valuation allowance represents the cumulative adjustment to fair

value of those specific receivables.

(c) The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.
158

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

December 31, 2016 ($ in millions)

Level 1

Level 2

Level 3

Total

Nonrecurring fair value measurements

Lower-of-
cost or
fair value
or valuation
reserve
allowance

Total gain
included in
earnings for
the year ended

Assets

Commercial finance receivables and loans, net (a)

Automotive

Other

Total commercial finance receivables and loans, net

Other assets

Repossessed and foreclosed assets (c)

Other

Total assets

$ — $ — $

—

$ — $ — $

108

(4)

(19)

(23)

(4)

—

(27)

n/m (b)

n/m

n/m = not meaningful
(a) Represents the portion of the portfolio specifically impaired during 2016. The related valuation allowance represents the cumulative adjustment to fair

value of those specific receivables.

(b) We consider the applicable valuation or loan loss allowance to be the most relevant indicator of the impact on earnings caused by the fair value

measurement. Accordingly, the table above excludes total gains and losses included in earnings for these items. The carrying values are inclusive of the
respective valuation or loan loss allowance.

(c) The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value.

Fair Value Option for Financial Assets

We elected the fair value option for an insignificant amount of conforming mortgage loans held-for-sale. We elected the fair value option

to mitigate earnings volatility by better matching the accounting for the assets with the related hedges. Our intent in electing fair value
measurement was to mitigate a divergence between accounting losses and economic exposure for certain assets and liabilities.

159

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Fair Value of Financial Instruments

The following table presents the carrying and estimated fair value of financial instruments, except for those recorded at fair value on a

recurring basis presented in the previous section of this note titled Recurring Fair Value. When possible, we use quoted market prices to
determine fair value. Where quoted market prices are not available, the fair value is internally derived based on appropriate valuation
methodologies with respect to the amount and timing of future cash flows and estimated discount rates. However, considerable judgment is
required in interpreting current market data to develop the market assumptions and inputs necessary to estimate fair value. As such, the actual
amount received to sell an asset or the amount paid to settle a liability could differ from our estimates. Fair value information presented herein
was based on information available at December 31, 2017, and December 31, 2016.

($ in millions)

December 31, 2017

Financial assets

Held-to-maturity securities

Loans held-for-sale, net

Finance receivables and loans, net

Nonmarketable equity investments

Financial liabilities

Deposit liabilities

Short-term borrowings

Long-term debt

December 31, 2016

Financial assets

Held-to-maturity securities

Finance receivables and loans, net

Nonmarketable equity investments

Financial liabilities

Deposit liabilities

Short-term borrowings

Long-term debt

Carrying
value

Level 1

Level 2

Level 3

Total

Estimated fair value

1,899

— $

1,865

— $

1,865

121,617

1,233

—

1,190

123,302

1,239

93,256

— $

91,029

11,413

44,226

—

27,807

11,417

18,817

91,029

11,417

46,624

839

— $

789

— $

789

117,800

1,046

—

1,012

118,750

1,067

79,022

— $

78,469

12,673

54,128

—

22,036

12,675

34,084

78,469

12,675

56,120

The following describes the methodologies and assumptions used to determine fair value for the significant classes of financial
instruments. In addition to the valuation methods discussed below, we also followed guidelines for determining whether a market was not
active and a transaction was not distressed. We assumed the price that would be received in an orderly transaction (including a market-based
return) and not in forced liquidation or distressed sale.

•

Cash and cash equivalents — Included in cash and cash equivalents are highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of change in value due to interest rate, quoted price, or penalty
on withdrawal. Classified as Level 1 under the fair value hierarchy, cash and cash equivalents generally expose us to limited credit
risk and are so near maturity that they present insignificant risk of changes in value because of changes in interest rates.
Accordingly, the carrying value approximates the fair value of these instruments.

• Held-to-maturity securities — Held-to-maturity securities, which consist of asset-backed retained notes and residential mortgage-
backed debt securities issued by government agencies, are carried at amortized cost. For fair value disclosure purposes, held-to-
maturity securities are classified as Level 2, with fair value based on observable market prices, when available.

•

Finance receivables and loans, net — With the exception of mortgage loans held-for-investment, the fair value of finance
receivables and loans was based on discounted future cash flows using applicable spreads to approximate current rates applicable to
each category of finance receivables and loans (an income approach using Level 3 inputs). The carrying value of commercial
receivables in certain markets and certain automotive and other receivables for which interest rates reset on a short-term basis with
applicable market indices are assumed to approximate fair value either because of the short-term nature or because of the interest
rate adjustment feature. The fair value of commercial receivables in other markets was based on discounted future cash flows using
applicable spreads to approximate current rates applicable to similar assets in those markets.

160

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The fair value of mortgage loans held-for-investment was based on a discounted cash flow basis utilizing cash flow projections

from models that utilized prepayment, default, and discount rate assumptions. These valuations consider unique attributes of the
loans such as geography, delinquency status, product type, and other factors.

• Nonmarketable equity investments — Nonmarketable equity investments primarily include investments in FHLB and FRB stock

and other equity investments carried at cost. As a member of the FHLB and FRB, Ally Bank is required to hold FHLB and FRB
stock. The stock can be sold only to the FHLB and FRB upon termination of membership, or redeemed at the sole discretion of the
FHLB and FRB, respectively. The fair value of FHLB and FRB stock is equal to the stock’s par value since the stock is bought,
sold, and/or redeemed at par. FHLB and FRB stock is carried at cost, which generally represents the stock’s par value.

• Deposit liabilities — Deposit liabilities represent certain consumer and brokered bank deposits, mortgage escrow deposits, and

dealer deposits. The fair value of deposits at Level 3 was estimated by discounting projected cash flows based on discount factors
derived from the forward interest rate swap curve.

•

Short-term borrowings and Long-term debt — Level 2 debt was valued using quoted market prices for similar instruments, when
available, or other means for substantiation with observable inputs. Debt valued by discounting projected cash flows using
internally derived inputs, such as prepayment speeds and discount rates, was classified as Level 3. For our credit facilities, which
are floating rate in nature and where pricing occurs on a more frequent basis, the carrying amount or par value is considered to be a
reasonable estimate of fair value. Based on the availability of observable inputs from an independent pricing service, as of June 30,
2017, we began using quoted market prices of similar instruments for certain of our long-term debt associated with asset-backed
securitizations. Following the change in valuation technique, the corresponding financial instruments were transferred from Level 3
to Level 2 within the fair value hierarchy.

Financial instruments for which carrying value approximates fair value — Certain financial instruments that are not carried at
fair value on the consolidated balance sheet are carried at amounts that approximate fair value primarily due to their short-term
nature and limited credit risk. These instruments include restricted cash, cash collateral, accrued interest receivable, accrued interest
payable, trade receivables and payables, and other short-term receivables and payables.

26. Offsetting Assets and Liabilities

Our derivative contracts and repurchase/reverse repurchase transactions are supported by qualifying master netting and master

repurchase agreements. These agreements are legally enforceable bilateral agreements that (i) create a single legal obligation for all individual
transactions covered by the agreement to the nondefaulting entity upon an event of default of the counterparty, including bankruptcy,
insolvency, or similar proceeding, and (ii) provide the nondefaulting entity the right to accelerate, terminate, and close-out on a net basis all
transactions under the agreement and to liquidate or set off collateral promptly upon an event of default of the counterparty.

To further mitigate the risk of counterparty default related to derivative instruments, we maintain collateral agreements with certain
counterparties. The agreements require both parties to maintain collateral in the event the fair values of the derivative financial instruments
meet established thresholds. In the event that either party defaults on the obligation, the secured party may seize the collateral. Generally, our
collateral arrangements are bilateral such that we and the counterparty post collateral for the obligation. Contractual terms provide for
standard and customary exchange of collateral based on changes in the market value of the outstanding derivatives. A party posts additional
collateral when their obligation rises or removes collateral when it falls, such that the net replacement cost of the nondefaulting party is
covered in the event of counterparty default.

In certain instances as it relates to our derivative instruments, we have the option to report derivative assets and liabilities as well as
assets and liabilities associated with cash collateral received or delivered that is governed by a master netting agreement on a net basis as long
as certain qualifying criteria are met. Similarly, for our repurchase/reverse repurchase transactions, we have the option to report recognized
assets and liabilities subject to a master netting agreement on a net basis if certain qualifying criteria are met. At December 31, 2017, these
instruments are reported as gross assets and gross liabilities on the Consolidated Balance Sheet.

161

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

The composition of offsetting derivative instruments, financial assets, and financial liabilities was as follows.

Gross
amounts of
recognized
assets/
(liabilities)

Gross
amounts
offset on the
Consolidated
Balance
Sheet

Net amounts
of assets/
(liabilities)
presented on
the
Consolidated
Balance Sheet

Gross amounts not offset on
the Consolidated Balance
Sheet

Financial
instruments

Collateral
(a) (b) (c)

Net
amount

(41) $

(892)

(933) $

— $

—

— $

—

— $

(41) $

(892)

(933) $

— $

—

— $

—

— $

—

— $

(40)

892

893

—

(40)

December 31, 2017 ($ in millions)

Assets

Derivative assets in net asset positions

Derivative assets with no offsetting

arrangements

Total assets (d)

Liabilities

Derivative liabilities in net liability

positions (d)

Securities sold under agreements to

repurchase (e)

Total liabilities

(a) Financial collateral received/pledged shown as a balance based on the sum of all net asset and liability positions between Ally and each individual

derivative counterparty.

(b) Amounts disclosed are limited to the financial asset or liability balance and, accordingly, exclude excess collateral received or pledged and noncash
collateral received. $2 million of noncash derivative collateral pledged to us was excluded at December 31, 2017. We do not record such collateral
received on our Consolidated Balance Sheet unless certain conditions are met.

(c) Certain agreements grant us the right to sell or pledge the noncash assets we receive as collateral. Noncash collateral pledged to us where the agreement

grants us the right to sell or pledge the underlying assets had a fair value of $2 million at December 31, 2017. We have not sold or pledged any of the
noncash collateral received under these agreements as of December 31, 2017.

(d) For additional information on derivative instruments and hedging activities, refer to Note 22.
(e) For additional information on securities sold under agreements to repurchase, refer to Note 16.

Gross
amounts of
recognized
assets/
(liabilities)

Gross
amounts
offset on the
Consolidated
Balance
Sheet

Net amounts
of assets/
(liabilities)
presented on
the
Consolidated
Balance Sheet

Gross amounts not offset on the
Consolidated Balance Sheet

Financial
instruments

Collateral
(a) (b) (c)

Net
amount

— $

—

— $

(91) $

— $

(91) $

(4)

(95)

(676)

—

(771) $

— $

(4)

(95)

(676)

(771) $

(4) $

(8)

(12) $

—

(9) $

—

(9) $

—

676

689

—

(70)

—

(70)

—

(70)

December 31, 2016 ($ in millions)

Assets

Derivative assets in net asset positions

Derivative assets in net liability positions

Total assets (d)

Liabilities

Derivative liabilities in net liability

positions

Derivative liabilities in net asset positions

Total derivative liabilities (d)

Securities sold under agreements to

repurchase (e)

Total liabilities

(a) Financial collateral received/pledged shown as a balance based on the sum of all net asset and liability positions between Ally and each individual

derivative counterparty.

(b) Amounts disclosed are limited to the financial asset or liability balance and, accordingly, exclude excess collateral received or pledged and noncash
collateral received. $6 million of noncash derivative collateral pledged to us was excluded at December 31, 2016. We do not record such collateral
received on our Consolidated Balance Sheet unless certain conditions are met.

(c) Certain agreements grant us the right to sell or pledge the noncash assets we receive as collateral. Noncash collateral pledged to us where the agreement

grants us the right to sell or pledge the underlying assets had a fair value of $6 million at December 31, 2016. We have not sold or pledged any of the
noncash collateral received under these agreements as of December 31, 2016.

(d) For additional information on derivative instruments and hedging activities, refer to Note 22.
(e) For additional information on securities sold under agreements to repurchase, refer to Note 16.

162

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

27. Segment and Geographic Information

Operating segments are defined as components of an enterprise that engage in business activity from which revenues are earned and
expenses incurred for which discrete financial information is available that is evaluated regularly by our chief operating decision maker in
deciding how to allocate resources and in assessing performance.

We report our results of operations on a line-of-business basis through four operating segments: Automotive Finance operations,

Insurance operations, Mortgage Finance operations, and Corporate Finance operations, with the remaining activity reported in Corporate and
Other. The operating segments are determined based on the products and services offered, and reflect the manner in which financial
information is currently evaluated by management. The following is a description of each of our reportable operating segments.

Automotive Finance operations — One of the largest full service automotive finance operations in the United States providing
automotive financing services to consumers and automotive dealers, and automotive and equipment financing services to companies
and municipalities. Our automotive finance services include providing retail installment sales contracts, loans and leases, offering
term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to companies, fleet financing,
providing financing to companies and municipalities for the purchase or lease of vehicles and equipment, and vehicle remarketing
services.

Insurance operations — A complementary automotive-focused business offering both consumer finance protection and insurance
products sold primarily through the automotive dealer channel, and commercial insurance products sold directly to dealers. As part
of our focus on offering dealers a broad range of consumer financial and insurance products, we provide VSCs, VMCs, and GAP
products. We also underwrite select commercial insurance coverages, which primarily insure dealers’ wholesale vehicle inventory.

Mortgage Finance operations — Primarily consists of the management of a held-for-investment consumer mortgage finance loan
portfolio, which includes bulk purchases of high-quality jumbo and LMI mortgage loans originated by third parties. In late 2016, we
introduced our direct-to-consumer mortgage offering, named Ally Home, consisting of a variety of jumbo and conforming fixed-
and adjustable-rate mortgage products with the assistance of a third-party fulfillment partner. Jumbo mortgage loans are generally
held on our balance sheet and are accounted for as held-for-investment. Conforming mortgage loans are generally originated as
held-for-sale and then sold to the fulfillment partner. Servicing is performed by a third party and no mortgage servicing rights are
created.

Corporate Finance operations — Primarily provides senior secured leveraged cash flow and asset-based loans to mostly U.S.-
based middle market companies. Our primary focus is on businesses owned by private equity sponsors with loans typically used for
leveraged buyouts, mergers and acquisitions, debt refinancing, restructurings, and working capital. In 2017, we introduced a
commercial real estate product to serve companies in the healthcare industry.

Corporate and Other primarily consists of centralized corporate treasury activities such as 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 our corporate funds-transfer pricing (FTP) and treasury asset liability management (ALM)
activities. Corporate and Other also includes certain equity investments, which primarily consist of FHLB and FRB stock, the management of
our legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, and reclassifications and eliminations
between the reportable operating segments. Additionally, financial results related to Ally Invest are currently included within Corporate and
Other.

We utilize an FTP methodology for the majority of our business operations. The FTP methodology assigns charge rates and credit rates
to classes of assets and liabilities based on expected duration and the benchmark rate curve plus an assumed credit spread. Matching duration
allocates interest income and interest expense to these reportable segments so their respective results are insulated from interest rate risk. This
methodology is consistent with our ALM practices, which includes managing interest rate risk centrally at a corporate level. The net residual
impact of the FTP methodology is included within the results of Corporate and Other.

The information presented in our reportable operating segments and geographic areas tables that follow are based in part on internal

allocations, which involve management judgment.

163

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Financial information for our reportable operating segments is summarized as follows.

Automotive
Finance
operations

Insurance
operations

Mortgage
Finance
operations

Corporate
Finance
operations

Corporate
and Other

Consolidated (a)

3,713

132

167

150

Year ended December 31, ($ in millions)

2017

Net financing revenue and other interest

income

Other revenue

Total net revenue

Provision for loan losses

Total noninterest expense

Income (loss) from continuing operations

before income tax expense

Total assets

2016

Net financing revenue and other interest

income (loss)

Other revenue

Total net revenue

Provision for loan losses

Total noninterest expense

Income (loss) from continuing operations

before income tax expense

Total assets

2015

Net financing revenue and other interest

income

Other revenue (loss)

Total net revenue (loss)

Provision for loan losses

Total noninterest expense

355

4,068

1,134

1,714

1,059

1,118

—

950

1,220

114,089

168

7,464

3,665

306

3,971

924

1,667

1,036

1,097

—

940

1,380

116,347

157

7,172

3,429

235

3,664

696

1,633

1,033

1,090

—

879

136

108

11,708

—

(4)

8,307

—

6,461

114

3,979

(15) $

29,908

1,507

167,148

212

231

(16)

262

121

(37) $

162

125

(13)

199

4,221

1,544

5,765

1,148

3,110

3,907

1,530

5,437

917

2,939

(61) $

28,719

1,581

163,728

(151)

(64)

(5)

155

3,719

1,142

4,861

707

2,761

(214) $

26,754

1,393

158,581

147

3,183

114

2,677

Income (loss) from continuing operations

before income tax expense

Total assets

1,335

115,636

211

7,053

(a) Net financing revenue and other interest income after the provision for loan losses totaled $3.1 billion for the year ended December 31, 2017, and $3.0

billion for both the years ended December 31, 2016, and 2015.

164

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Information concerning principal geographic areas was as follows.

Year ended December 31, ($ in millions)

Income (loss)
from continuing
operations
before income
tax expense

Total net
revenue (a)

Net income
(loss) (b)

Identifiable
assets (c)

Long-lived
assets (d)

2017

Canada

Europe

Latin America

Asia-Pacific

Total foreign (e)

Total domestic (f)

Total

2016

Canada

Europe

Latin America

Asia-Pacific

Total foreign (e)

Total domestic (f)

Total

2015

Canada

Europe

Latin America

Asia-Pacific

Total foreign (e)

Total domestic (f)

Total

—

5,676

5,765

—

5,347

5,437

—

(1)

—

1,466

1,507

—

1,537

1,581

—

(6)

—

898

929

(1)

—

1,037

1,067

(2)

452

512

777

406

315

746

166,162

166,908

499

276

800

162,688

163,488

514

325

869

157,685

—

9,197

—

11,846

—

16,506

4,762

1,342

4,861

1,393

1,289

158,554

(a) Revenue consists of net financing revenue and other interest income and total other revenue as presented in our Consolidated Statement of Income.
(b) Gain (loss) realized on sale of discontinued operations are allocated to the geographic area in which the business operated.
(c)
(d) Long-lived assets consist of investments in operating leases, net, and net property and equipment.
(e) Our foreign operations as of December 31, 2017, 2016, and 2015, consist of our ongoing Insurance operations in Canada and our remaining international

Identifiable assets consist of total assets excluding goodwill.

entities in wind-down.

(f) Amounts include eliminations between our domestic and foreign operations.

28. Parent and Guarantor Consolidating Financial Statements

Certain of our senior notes issued by the parent are guaranteed by 100% directly owned subsidiaries of Ally (the Guarantors). As of
December 31, 2017, the Guarantors include Ally US LLC and IB Finance Holding Company, LLC (IB Finance), each of which fully and
unconditionally guarantee the senior notes on a joint and several basis.

The following financial statements present condensed consolidating financial data for (i) Ally Financial Inc. (on a parent company-only
basis); (ii) the Guarantors; (iii) the nonguarantor subsidiaries (all other subsidiaries); and (iv) an elimination column for adjustments to arrive
at (v) the information for the parent company, the Guarantors, and nonguarantors on a consolidated basis.

Investments in subsidiaries are accounted for by the parent company and the Guarantors using the equity-method for this presentation.
Results of operations of subsidiaries are therefore classified in the parent company’s and Guarantors’ investment in subsidiaries accounts. The
elimination entries set forth in the following condensed consolidating financial statements eliminate distributed and undistributed income of
subsidiaries, investments in subsidiaries, and intercompany balances and transactions between the parent, the Guarantors, and nonguarantors.

165

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Condensed Consolidating Statements of Comprehensive Income

Year ended December 31, 2017 ($ in millions)

Parent

Guarantors

Nonguarantors

Consolidating
adjustments

Ally
consolidated

Financing (loss) revenue and other interest income

Interest and fees on finance receivables and loans

(27) $

— $

5,846

— $

5,819

Interest and fees on finance receivables and loans — intercompany

Interest and dividends on investment securities and other earning assets

Interest on cash and cash equivalents

Interest-bearing cash — intercompany

Operating leases

Total financing revenue and other interest income

Interest expense

Interest on deposits

Interest on short-term borrowings

Interest on long-term debt

Interest on intercompany debt

Total interest expense

Net depreciation expense on operating lease assets

Net financing revenue

Cash dividends from subsidiaries

Bank subsidiary

Nonbank subsidiaries

Other revenue

Insurance premiums and service revenue earned

Gain on mortgage and automotive loans, net

Loss on extinguishment of debt

Other gain on investments, net

Other income, net of losses

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Insurance losses and loss adjustment expenses

Other operating expenses

Total noninterest expense

Income from continuing operations before income tax expense and

undistributed (loss) income of subsidiaries

Income tax expense from continuing operations

Net income from continuing operations

Income (loss) from discontinued operations, net of tax

Undistributed (loss) income of subsidiaries

Bank subsidiary

Nonbank subsidiaries

Net income

Other comprehensive income, net of tax

Comprehensive income

—

1,101

1,179

(1,183)

3,300

752

—

(1)

—

676

715

3,584

465

180

—

899

1,079

2,040

337

1,703

—

3,300

—

3,300

—

3,300

—

3,300

—

(1,168)

387

929

106

—

2,132

601

1,856

8,346

1,078

552

1,709

1,233

5,404

—

973

(6)

102

840

1,937

7,341

683

915

332

1,892

3,139

3,519

244

3,275

(4)

—

3,271

104

(18)

(2)

—

(11)

—

(31)

(4)

—

(27)

(31)

—

(6,600)

(752)

—

(1,108)

(8,460)

—

(1,108)

(7,352)

—

(7,352)

—

2,336

(387)

(5,403)

(169)

—

599

—

1,867

8,322

1,077

127

1,653

—

2,857

1,244

4,221

—

973

(7)

102

408

1,544

5,765

1,148

1,095

332

1,683

3,110

1,507

581

926

—

929

106

1,035

2,197

3,375

(5,572) $

1,035

166

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Year ended December 31, 2016 ($ in millions)

Parent

Guarantors

Nonguarantors

Consolidating
adjustments

Ally
consolidated

Financing (loss) revenue and other interest income

Interest and fees on finance receivables and loans

(104) $

— $

5,266

— $

5,162

Interest and fees on finance receivables and loans — intercompany

Interest and dividends on investment securities and other earning assets

Interest on cash and cash equivalents

Interest-bearing cash — intercompany

Operating leases

Total financing (loss) revenue and other interest income

Interest expense

Interest on deposits

Interest on short-term borrowings

Interest on long-term debt

Interest on intercompany debt

Total interest expense

Net depreciation expense on operating lease assets

Net financing revenue

Cash dividends from subsidiaries

Nonbank subsidiaries

Other revenue

Insurance premiums and service revenue earned

(Loss) gain on mortgage and automotive loans, net

Loss on extinguishment of debt

Other gain on investments, net

Other income, net of losses

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Insurance losses and loss adjustment expenses

Other operating expenses

Total noninterest expense

(Loss) income from continuing operations before income tax

(benefit) expense and undistributed income (loss) of subsidiaries

Income tax (benefit) expense from continuing operations

Net (loss) income from continuing operations

Loss from discontinued operations, net of tax

Undistributed income (loss) of subsidiaries

Bank subsidiary

Nonbank subsidiaries

Net income

Other comprehensive loss, net of tax

Comprehensive income

—

(71)

1,161

1,229

(1,314)

965

—

(11)

(3)

—

1,253

1,239

890

408

573

—

1,261

1,834

(1,352)

(279)

(1,073)

(39)

1,273

906

1,067

(110)

—

(82)

—

1,273

(2)

1,353

(63)

421

2,694

8,407

822

581

1,431

1,755

5,221

—

945

(2)

176

937

2,078

7,299

509

419

342

2,130

2,891

3,899

831

3,068

(5)

—

3,063

(106)

(19)

(3)

—

(9)

—

(31)

—

(31)

—

(965)

—

(1,796)

(1,787)

(2,752)

—

(1,786)

(966)

—

(966)

—

(2,546)

(904)

(4,416)

169

957

1,290

2,957

(4,247) $

—

418

—

2,711

8,305

830

1,742

—

2,629

1,769

3,907

—

945

(5)

185

394

1,530

5,437

917

992

342

1,605

2,939

1,581

470

1,111

(44)

—

1,067

(110)

957

167

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Year ended December 31, 2015 ($ in millions)

Parent

Guarantors

Nonguarantors

Consolidating
adjustments

Ally
consolidated

Financing (loss) revenue and other interest income

Interest and fees on finance receivables and loans

(83) $

— $

4,653

— $

4,570

Interest and fees on finance receivables and loans — intercompany

Interest on loans held-for-sale

Interest and dividends on investment securities and other earning assets

Interest on cash and cash equivalents

Interest-bearing cash — intercompany

Operating leases

Total financing (loss) revenue and other interest income

Interest expense

Interest on deposits

Interest on short-term borrowings

Interest on long-term debt

Interest on intercompany debt

Total interest expense

Net depreciation expense on operating lease assets

Net financing revenue

Cash dividends from subsidiaries

Bank subsidiary

Nonbank subsidiaries

Other revenue

Insurance premiums and service revenue earned

(Loss) gain on mortgage and automotive loans, net

Loss on extinguishment of debt

Other gain on investments, net

Other income, net of losses

Total other revenue

Total net revenue

Provision for loan losses

Noninterest expense

Compensation and benefits expense

Insurance losses and loss adjustment expenses

Other operating expenses

Total noninterest expense

(Loss) income from continuing operations before income tax

(benefit) expense and undistributed income (loss) of subsidiaries

Income tax (benefit) expense from continuing operations

Net (loss) income from continuing operations

Income from discontinued operations, net of tax

Undistributed income (loss) of subsidiaries

Bank subsidiary

Nonbank subsidiaries

Net income

Other comprehensive loss, net of tax

Comprehensive income

—

381

—

3,398

8,397

718

1,662

—

2,429

2,249

3,719

—

940

(357)

155

359

1,142

4,861

707

963

293

1,505

2,761

1,393

496

897

392

—

1,289

(165)

1,124

—

(56)

1,121

1,203

(1,266)

525

1,123

—

(9)

(355)

—

1,373

1,009

1,391

157

571

—

1,247

1,818

(584)

(267)

(317)

356

581

669

1,289

(165)

—

525

—

525

—

525

—

525

—

581

(1)

1,105

(43)

381

3,389

8,502

708

541

1,275

2,242

4,985

—

940

(2)

155

1,373

2,520

7,505

550

842

293

2,195

3,330

3,625

763

2,862

—

2,898

(172)

(41)

—

(8)

—

(49)

—

(49)

—

(1,050)

(1,123)

—

(2,387)

(4,560)

—

(450)

—

(1,937)

(2,387)

(2,173)

—

(2,173)

—

(1,162)

(668)

(4,003)

215

1,124

1,062

2,726

(3,788) $

168

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Condensed Consolidating Balance Sheet

December 31, 2017 ($ in millions)

Parent (a) Guarantors Nonguarantors (a)

Consolidating
adjustments

Ally
consolidated

Assets

Cash and cash equivalents

Noninterest-bearing

Interest-bearing

Interest-bearing — intercompany

Total cash and cash equivalents

Available-for-sale securities

Held-to-maturity securities

Loans held-for-sale, net

Finance receivables and loans, net

Intercompany loans to

Nonbank subsidiaries

Allowance for loan losses

Total finance receivables and loans, net

Investment in operating leases, net

Intercompany receivables from

Bank subsidiary

Nonbank subsidiaries

Investment in subsidiaries

Bank subsidiary

Nonbank subsidiaries

Premiums receivable and other insurance assets

Other assets

Total assets

Liabilities

Deposit liabilities

Noninterest-bearing

Interest-bearing

Interest-bearing — intercompany

Total deposit liabilities

Short-term borrowings

Long-term debt

Intercompany debt to

Bank subsidiary

Nonbank subsidiaries

Intercompany payables to

Bank subsidiary

Nonbank subsidiaries

Interest payable

Unearned insurance premiums and service revenue

Accrued expenses and other liabilities

Total liabilities

Total equity

Total liabilities and equity

— $

770

1,138

1,217

—

7,434

879

(185)

8,128

—

16,962

8,111

—

2,207

16,962

—

3,403

695

4,868

22,821

1,973

108

— $

—

(1,833)

—

(74)

—

844

3,408

—

4,252

22,821

1,899

108

115,459

—

122,893

408

(1,091)

114,776

8,722

—

2,082

5,105

(1,287)

—

(1,287)

—

(80)

(148)

(33,924)

(8,111)

(35)

(1,649)

—

(1,276)

121,617

8,741

—

2,047

5,663

36,795

16,962

160,532

(47,141) $

167,148

— $

108

—

3,171

17,966

1,103

132

200

—

639

23,301

13,494

—

16,962

93,136

1,139

94,383

8,242

26,260

—

879

—

127

175

2,604

2,790

135,460

25,072

— $

—

(1,139)

—

(74)

(1,982)

(4)

(259)

—

(1,649)

(5,107)

(42,034)

108

93,148

—

93,256

11,413

44,226

—

375

2,604

1,780

153,654

13,494

36,795

16,962

160,532

(47,141) $

167,148

(a) Amounts presented are based upon the legal transfer of the underlying assets to VIEs in order to reflect legal ownership.

169

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

December 31, 2016 ($ in millions)

Parent (a)

Guarantors

Nonguarantors (a)

Consolidating
adjustments

Ally
consolidated

Assets

Cash and cash equivalents

Noninterest-bearing

Interest-bearing

Interest-bearing — intercompany

Total cash and cash equivalents

Trading securities

Available-for-sale securities

Held-to-maturity securities

Finance receivables and loans, net

Intercompany loans to

Bank subsidiary

Nonbank subsidiaries

Allowance for loan losses

Total finance receivables and loans, net

Investment in operating leases, net

Intercompany receivables from

Bank subsidiary

Nonbank subsidiaries

Investment in subsidiaries

Bank subsidiary

Nonbank subsidiaries

Premiums receivable and other insurance assets

Other assets

Total assets

Liabilities

Deposit liabilities

Noninterest-bearing

Interest-bearing

Total deposit liabilities

Short-term borrowings

Long-term debt

Intercompany debt to

Bank subsidiary

Nonbank subsidiaries

Intercompany payables to

Nonbank subsidiaries

Interest payable

Unearned insurance premiums and service revenue

Accrued expenses and other liabilities

Total liabilities

Total equity

Total liabilities and equity

720

100

—

820

—

4,705

1,125

1,779

(115)

7,494

299

107

17,727

10,318

—

4,347

— $

827

— $

—

17,727

—

4,287

401

5,515

19,253

839

114,239

—

626

(1,029)

113,836

11,428

—

1,936

5,085

—

(401)

(82)

(327)

—

(1,125)

(2,405)

—

(3,530)

—

(299)

(174)

(35,454)

(10,318)

(31)

(2,578)

1,547

4,387

—

5,934

—

18,926

839

118,944

—

(1,144)

117,800

11,470

—

1,905

6,854

41,154

17,727

158,041

(53,194) $

163,728

— $

167

3,622

21,798

330

1,027

153

253

—

487

27,837

13,317

—

17,727

78,771

78,855

9,051

32,330

—

2,903

351

2,500

3,911

129,999

28,042

—

(330)

(3,930)

(504)

—

(2,661)

(7,425)

(45,769)

78,938

79,022

12,673

54,128

—

351

2,500

1,737

150,411

13,317

41,154

17,727

158,041

(53,194) $

163,728

(a) Amounts presented are based upon the legal transfer of the underlying assets to VIEs in order to reflect legal ownership.

170

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Condensed Consolidating Statement of Cash Flows

Year ended December 31, 2017 ($ in millions)

Parent

Guarantors Nonguarantors

Consolidating
adjustments

Ally
consolidated

Operating activities

Net cash provided by operating activities

4,591

3,300

3,466

(7,278) $

4,079

Investing activities

Purchases of available-for-sale securities

Proceeds from sales of available-for-sale securities

Proceeds from repayments of available-for-sale securities

Purchases of held-to-maturity securities

Proceeds from repayments of held-to-maturity securities

Net change in investment securities — intercompany

Purchases of finance receivables and loans held-for-investment

Proceeds from sales of finance receivables and loans initially held-for-

investment

Originations and repayments of finance receivables and loans held-for-

investment and other, net

Net change in loans — intercompany

Purchases of operating lease assets

Disposals of operating lease assets

Capital contributions to subsidiaries

Returns of contributed capital

Net change in nonmarketable equity investments

Other, net

Net cash provided by (used in) investing activities

Financing activities

Net change in short-term borrowings — third party

Net (decrease) increase in deposits

Proceeds from issuance of long-term debt — third party

Repayments of long-term debt — third party

Net change in debt — intercompany

Repurchase of common stock

Dividends paid — third party

Dividends paid and returns of contributed capital — intercompany

Capital contributions from parent

—

(35)

106

860

2,068

—

(1,212)

1,567

—

(31)

3,343

(453)

(156)

354

(6,111)

(225)

(753)

(184)

—

(5)

—

(5)

—

(3,300)

Net cash (used in) provided by financing activities

(7,528)

(3,295)

Effect of exchange-rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of year

—

406

989

—

(11,234)

4,633

2,899

(1,026)

291

(5,417)

1,233

217

(4,052)

5,554

—

(187)

(99)

(7,087)

(810)

15,466

15,654

(21,797)

(2,074)

—

(5,619)

1,212

2,032

(1,586)

7,293

—

(298)

—

(1,956)

(2,285)

—

1,217

(1,567)

—

(89)

(4,978)

—

(1,138)

1,961

—

2,299

—

8,919

(1,217)

10,824

—

(1,432)

(401)

Cash and cash equivalents and restricted cash at end of year

1,395

— $

5,707

(1,833) $

(11,234)

4,633

2,899

(1,026)

—

(5,452)

1,339

(1,063)

—

(4,052)

5,567

—

(187)

(219)

(8,727)

(1,263)

14,172

17,969

(27,908)

—

(753)

(184)

—

2,033

(2,612)

7,881

5,269

The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Condensed Consolidated Balance

Sheet to the Condensed Consolidated Statement of Cash Flows.

December 31, 2017 ($ in millions)

Parent

Guarantors Nonguarantors

Consolidating
adjustments

Ally
consolidated

Cash and cash equivalents as disclosed on the Consolidated Balance

Sheet

Restricted cash included in other assets on the Consolidated Balance

Sheet (a)

Total cash and cash equivalents and restricted cash as disclosed in the

Consolidated Statement of Cash Flows

1,217

— $

4,868

(1,833) $

4,252

178

—

839

—

1,017

1,395

— $

5,707

(1,833) $

5,269

(a) Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 14 for additional details describing the nature of restricted cash balances.

171

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Year ended December 31, 2016 ($ in millions)

Parent

Guarantors

Nonguarantors

Consolidating
adjustments

Ally
consolidated

Operating activities

Net cash provided by operating activities

241

5,383

(1,063) $

4,567

Investing activities

Purchases of available-for-sale securities

Proceeds from sales of available-for-sale securities

Proceeds from repayments of available-for-sale securities

Purchases of held-to-maturity securities

Purchases of finance receivables and loans held-for-investment

Proceeds from sales of finance receivables and loans initially held-for-

investment

Originations and repayments of finance receivables and loans held-for-

investment and other, net

Net change in loans — intercompany

Purchases of operating lease assets

Disposals of operating lease assets

Acquisitions, net of cash acquired

Capital contributions to subsidiaries

Returns of contributed capital

Net change in nonmarketable equity investments

Other, net

Net cash provided by (used in) investing activities

Financing activities

Net change in short-term borrowings — third party

Net (decrease) increase in deposits

Proceeds from issuance of long-term debt — third party

Repayments of long-term debt — third party

Net change in debt — intercompany

Redemption of preferred stock

Repurchase of common stock

Dividends paid — third party

Dividends paid and returns of contributed capital — intercompany

Capital contributions from parent

Net cash (used in) provided by financing activities

Effect of exchange-rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of year

—

(4)

—

2,013

877

—

(309)

(3,908)

3,678

—

(206)

2,166

169

(61)

979

(2,662)

(382)

(696)

(341)

(108)

—

(3,102)

—

(695)

1,684

—

(14)

—

(14)

—

(16,031)

11,036

3,379

(841)

(3,855)

4,285

(10,839)

(67)

(3,274)

6,279

—

(628)

(191)

(10,747)

4,395

12,569

13,176

(23,750)

(877)

—

(4,644)

3,908

4,777

(586)

7,879

—

(810)

—

3,908

(3,686)

—

(497)

—

1,259

—

4,658

(3,908)

2,009

—

449

(850)

Cash and cash equivalents and restricted cash at end of year

989

— $

7,293

(401) $

(16,031)

11,036

3,379

(841)

(3,859)

4,285

(8,826)

—

(3,274)

6,304

(309)

—

(628)

(306)

(9,070)

4,564

12,508

14,155

(26,412)

—

(696)

(341)

(108)

—

3,670

(832)

8,713

7,881

The following table provides a reconciliation of cash and cash equivalents and restricted cash from the Condensed Consolidated Balance Sheet to the

Condensed Consolidated Statement of Cash Flows.

December 31, 2016 ($ in millions)

Parent

Guarantors

Nonguarantors

Consolidating
adjustments

Ally
consolidated

Cash and cash equivalents as disclosed on the Consolidated Balance

Sheet

Restricted cash included in other assets on the Consolidated Balance

Sheet (a)

Total cash and cash equivalents and restricted cash as disclosed in the

Consolidated Statement of Cash Flows

820

— $

5,515

(401) $

5,934

169

—

1,778

—

1,947

989

— $

7,293

(401) $

7,881

(a) Restricted cash balances relate primarily to Ally securitization arrangements. Refer to Note 14 for additional details describing the nature of restricted cash balances.

172

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Year ended December 31, 2015 ($ in millions)

Parent

Guarantors

Nonguarantors

Consolidating
adjustments

Ally
consolidated

Operating activities

Net cash provided by operating activities

370

525

6,390

(2,174) $

5,111

Investing activities

Purchases of available-for-sale securities

Proceeds from sales of available-for-sale securities

Proceeds from repayments of available-for-sale securities

Purchases of finance receivables and loans held-for-investment

Proceeds from sales of finance receivables and loans initially held-for-

investment

Originations and repayments of finance receivables and loans held-for-

investment and other, net

Net change in loans — intercompany

Purchases of operating lease assets

Disposals of operating lease assets

Capital contributions to subsidiaries

Returns of contributed capital

Proceeds from sale of business units, net

Net change in nonmarketable equity investments

Other, net

Net cash provided by (used in) investing activities

Financing activities

Net change in short-term borrowings — third party

Net (decrease) increase in deposits

Proceeds from issuance of long-term debt — third party

Repayments of long-term debt — third party

Net change in debt — intercompany

Repurchase and redemption of preferred stock

Repurchase of common stock

Dividends paid — third party

Dividends paid and returns of contributed capital — intercompany

Capital contributions from parent

Net cash (used in) provided by financing activities

Effect of exchange-rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of year

—

(169)

—

1,954

240

(94)

(796)

1,444

1,049

—

(47)

3,588

115

(91)

5,428

(5,931)

(977)

(559)

(16)

(2,571)

—

(4,602)

—

(644)

2,328

—

(1)

—

(1)

—

(525)

(524)

—

(12,250)

6,874

4,255

(4,332)

3,197

(11,298)

1,211

(4,591)

5,539

—

(147)

—

(1,451)

—

797

(1,444)

—

(12,250)

6,874

4,255

(4,501)

3,197

(9,344)

—

(4,685)

5,546

—

1,049

(147)

(11,492)

(2,098)

(10,003)

913

8,338

25,237

(25,419)

(240)

—

(3,092)

796

6,533

(4)

1,427

6,452

—

1,217

—

3,617

(797)

4,037

—

(235)

(615)

1,028

8,247

30,665

(31,350)

—

(559)

(16)

(2,571)

—

5,444

(4)

548

8,165

8,713

Cash and cash equivalents and restricted cash at end of year

1,684

— $

7,879

(850) $

29. Guarantees and Commitments
Guarantees

Guarantees are defined as contracts or indemnification agreements that contingently require us to make payments to third parties based
on changes in the underlying agreements with the guaranteed parties. The following summarizes our outstanding guarantees, including those
of our discontinued operations, made to third parties on our Consolidated Balance Sheet, for the periods shown.

December 31, ($ in millions)

2017

2016

Maximum
liability

Carrying value
of liability

Maximum
liability

Carrying value
of liability

Standby letters of credit and other guarantees

227

175

Corporate Finance has exposure to standby letters of credit that represent irrevocable guarantees of payment of specified financial
obligations. Third-party beneficiaries primarily accept standby letters of credit as insurance in the event of nonperformance by our borrowers.
Our borrowers may request letters of credit under their revolving loan facility up to a certain sub-limit amount. Expiration dates on letters of
credit range from certain ongoing commitments that will expire during the upcoming year to terms of several years for certain letters of credit.

173

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

If nonperformance occurs by a borrower for which we have issued a letter of credit, we can be liable for payment of the letter of credit to the
beneficiary with our recourse being a charge to the borrower’s loan facility. As many of these commitments are subject to borrowing base
agreements and other restrictive covenants or may expire without being fully drawn, the contract amounts are not necessarily indicative of
future cash requirements.

In connection with our Ally Invest wealth management business, we introduce customer securities accounts to a clearing broker, which
clears and maintains custody of all customer assets and account activity. We are responsible for obtaining from each customer such funds or
securities as are required to be deposited or maintained in their accounts. As a result, we are liable for any loss, liability, damage, cost, or
expense incurred or sustained by the clearing broker as a result of the failure of any customer to timely make payments or deposits of
securities to satisfy their contractual obligations. In addition, customer securities activities are transacted on either a cash or margin basis. In
margin transactions, we may extend credit to the customer, through our clearing broker, subject to various regulatory rules and margin lending
practices, collateralized by cash and securities in the customer’s account. In connection with these activities, we also execute customer
transactions involving the sale of securities not yet purchased. Such transactions may expose us to credit risk in the event the customer’s
assets are not sufficient to fully cover losses, which the customer may incur. In the event the customer fails to satisfy its obligations, we will
purchase or sell financial instruments in the customer’s account in order to fulfill the customer’s obligations. The maximum potential
exposure under these arrangements is difficult to estimate; however, the potential for us to incur material losses pursuant to these
arrangements is remote.

Commitments
Financing Commitments

The contractual commitments were as follows.

December 31, ($ in millions)

Unused revolving credit line commitments and other (a)

Home equity lines of credit (b)

Commitments to provide capital to investees (c)

Construction-lending commitments (d)

Mortgage loan origination commitments (e)

2017

2016

2,341

1,995

318

283

144

356

206

164

—

(a) The unused portion of revolving lines of credit reset at prevailing market rates and, as such, approximate market value.
(b) We are committed to fund the remaining unused balances on home equity lines of credit.
(c) We are committed to contribute capital to certain investees. The fair value of these commitments is considered in the overall valuation of the underlying

assets with which they are associated.

(d) The fair value of these commitments is considered in the overall valuation of the related assets.
(e) Commitments with mortgage loan applicants in which the loan terms, including interest rate and price, are guaranteed for a designated period of time

subject to the completion of underwriting procedures.

Revolving credit line commitments contain an element of credit risk. Management reduces its credit risk for unused revolving credit line

commitments by applying the same credit policies in making commitments as it does for extending loans. We typically require collateral as
these commitments are drawn.

Lease Commitments

Future minimum rental payments required under operating leases, primarily for real property, with noncancelable lease terms expiring

after December 31, 2017, are as follows.

Year ended December 31, ($ in millions)

2018

2019

2020

2021

2022

2023 and thereafter

Total minimum payment required

316

489

Certain of the leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases were $46

million for the year ended December 31, 2017, and $51 million for the years ended December 31, 2016, and 2015.

174

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Contractual Commitments

We have entered into multiple agreements for information technology, voice and communication technology, and related maintenance.
Many of the agreements are subject to variable price provisions, fixed or minimum price provisions, and termination or renewal provisions.

Year ended December 31, ($ in millions)

2018

2019 and 2020

2021 and thereafter

Total future payment obligations

30. Contingencies and Other Risks
Concentration with GM and Chrysler

123

While we are continuing to diversify our automotive finance and insurance businesses and to expand into other financial services,
General Motors Company (GM) and Fiat Chrysler Automobiles US LLC (Chrysler) dealers and their retail customers continue to constitute a
significant portion of our customer base. GM, Chrysler, and their captive finance companies compete forcefully with us and could take further
actions that negatively impact the amount of business that we do with GM and Chrysler dealers and their customers. Further, a significant
adverse change in GM’s or Chrysler’s business—including, for example, in the production or sale of GM or Chrysler vehicles, the quality or
resale value of GM or Chrysler vehicles, GM’s or Chrysler’s relationships with its key suppliers, or the rate or volume of recalls of GM or
Chrysler vehicles—could negatively impact our GM and Chrysler dealer and retail customer bases. Any future reductions in GM and Chrysler
business that we are not able to offset could adversely affect our business and financial results.

Legal Matters

Ally and its subsidiaries, including Ally Bank, are or may be subject to potential liability in connection with pending or threatened legal

proceedings and other matters. These legal matters may be formal or informal and include litigation and arbitration with one or more
identified claimants, certified or purported class actions with yet-to-be-identified claimants, and regulatory or other governmental
information-gathering requests, examinations, investigations, and enforcement proceedings. Our legal matters exist in varying stages of
adjudication, arbitration, negotiation, or investigation and span our lines of business and operations. Claims may be based in law or equity—
such as those arising under contracts or in tort and those involving banking, consumer-protection, securities, tax, employment, and other laws
—and some can present novel legal theories and allege substantial or indeterminate damages.

We accrue for a legal matter when a loss becomes probable and the amount of loss can be reasonably estimated. Accruals are evaluated

each quarter and may be adjusted, upward or downward, based on our best judgment after consultation with counsel. No assurance exists that
our accruals will not need to be adjusted in the future. When a probable or reasonably possible loss on a legal matter could be material to our
consolidated financial condition, results of operations, or cash flows, we provide disclosure in this note as prescribed by ASC 450,
Contingencies.

Descriptions of our material legal matters follow. We do not believe, however, that an estimate of reasonably possible losses or a range of

reasonably possible losses—whether in excess of any related accrual or where no accrual exists—can be made for any of these matters for
some or all of the reasons identified in the preceding paragraph.

Securities Litigation

In October 2016, a purported class action—Bucks County Employees Retirement Fund v. Ally Financial Inc. et al.—was filed in the
Circuit Court for Wayne County in the State of Michigan (Case No. 16-013616-CZ). This matter was removed to the U.S. District Court for
the Eastern District of Michigan on November 18, 2016. The complaint alleges material misstatements and omissions in connection with
Ally’s initial public offering in April 2014, including a failure to adequately disclose the severity of rising subprime automotive loan
delinquency rates, deficient underwriting measures employed in the origination of subprime automotive loans, and aggressive tactics used
with low-income borrowers. The request for relief includes an indeterminate amount of damages, fees, and costs and other remedies. In
January 2017, another purported class action—National Shopmen Pension Fund v. Ally Financial Inc. et al.—was filed in the Circuit Court
for Oakland County in the State of Michigan (Case No. 2017-156719-CB). This matter was removed to the U.S. District Court for the Eastern
District of Michigan on January 30, 2017. In March 2017, a third purported class action—James McIntire v. Ally Financial Inc. et al.—was
filed in the Circuit Court for Wayne County in the State of Michigan (Case No. 17-003811-CZ). This matter was removed to the U.S. District
Court for the Eastern District of Michigan on March 15, 2017. The allegations and requested relief in the National Shopmen Pension Fund
and James McIntire complaints are substantially similar to those included in the complaint filed by Bucks County Employees Retirement

175

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

Fund. All three matters were remanded from the U.S. District Court for the Eastern District of Michigan to the state circuit courts on May 26,
2017, and have been consolidated for discovery in Wayne County Circuit Court as In re Ally Financial, Inc. Securities Litigation (Case No.
16-013616-CB). In November 2017, the plaintiffs filed a consolidated amended complaint, and the court entered an interim stay of the
litigation. We intend to vigorously defend against each of these actions.

Automotive Subprime Matters

In October 2014, we received a document request from the SEC in connection with its investigation related to subprime automotive
finance and related securitization activities. Separately, in December 2014, we received a subpoena from the U.S. Department of Justice
requesting similar information. In May 2015 and December 2016, we received information requests from the New York Department of
Financial Services requesting similar information. We responded timely to each of the requests.

Other Contingencies

Ally and its subsidiaries, including Ally Bank, are or may be subject to potential liability under various other contingent exposures,
including indemnification, tax, self-insurance, and other miscellaneous contingencies. We accrue for a contingent exposure when a loss
becomes probable and the amount of loss can be reasonably estimated. Accruals are evaluated each quarter and may be adjusted, upward or
downward, based on our best judgment. No assurance exists that our accruals will not need to be adjusted in the future, and actual losses may
be higher or lower than any amounts accrued or estimated for those exposures, possibly to a significant degree. On the basis of information
currently available, we do not believe that these other contingent exposures will be material to our consolidated financial condition, results of
operations, or cash flows. Refer to Note 1 for additional information related to our policy for establishing reserves for legal and regulatory
matters.

176

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

31. Quarterly Financial Statements (unaudited)

($ in millions)

2017

Net financing revenue and other interest income

Other revenue

Total net revenue

Provision for loan losses

Total noninterest expense

Income from continuing operations before income tax expense

Income tax expense from continuing operations (a)

Net income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Basic earnings per common share (b)

Net income from continuing operations

Net income

Diluted earnings per common share (b)

Net income from continuing operations

Net income

Cash dividends per common share

2016

Net financing revenue and other interest income

Other revenue

Total net revenue

Provision for loan losses

Total noninterest expense

Income from continuing operations before income tax expense

Income tax expense from continuing operations (c)

Net income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Basic earnings per common share (b)

Net income from continuing operations

Net income

Diluted earnings per common share (b)

Net income from continuing operations

Net income

Cash dividends per common share

First
quarter

Second
quarter

Third
quarter

Fourth
quarter

1,067

1,081

388

1,455

381

1,462

979

396

1,375

271

778

326

113

213

214

0.46

0.08

951

376

1,327

220

710

397

150

247

250

0.48

0.49

0.48

0.49

269

810

376

122

254

(2)

252

0.55

0.08

984

374

1,358

172

773

413

357

360

0.70

0.71

0.70

0.71

1,094

379

1,473

294

769

410

231

179

181

0.40

0.41

0.40

0.41

0.12

976

392

1,368

267

721

380

134

246

248

0.52

0.53

0.52

0.08

314

753

395

115

280

282

0.62

0.63

0.62

0.63

0.12

996

388

1,384

258

735

391

130

261

(52)

209

0.54

0.43

0.54

0.43

0.08

— $

(a) Amount for the fourth quarter of 2017 includes $119 million of tax expense attributable to tax reform enacted on December 22, 2017, as further described

in Note 23

(b) Earnings per share is calculated quarterly on an independent basis, therefore the total of the amounts presented for each year above may not reconcile to

the annual amounts presented in Note 20.

(c) Amount for the second quarter of 2016 includes a nonrecurring tax benefit due to a U.S. tax reserve release related to a prior-year federal return that

reduced our liability for unrecognized tax benefits, as further described in Note 23.

177

Notes to Consolidated Financial Statements

Ally Financial Inc. • Form 10-K

32. Subsequent Events
Declaration of Quarterly Dividend Payment

On January 10, 2018, the Board declared a quarterly cash dividend payment of $0.13 per share on all common stock, a $0.01 per share
increase relative to our prior quarterly cash dividend. The dividend was paid on February 15, 2018, to stockholders of record at the close of
business on February 1, 2018.

178

Ally Financial Inc. • Form 10-K

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended

(the Exchange Act), designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded,
processed, summarized, and reported within the specified time periods. Our disclosure controls and procedures are also designed to ensure
that information required to be disclosed in the reports we file and submit under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to
allow for timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of internal control
including the possibility of human error or the circumvention or overriding of controls through individual actions or collusion. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives
will be met.

As of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer evaluated, with the

participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) and concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

In the normal course of business, we review our controls and procedures and make enhancements or modifications intended to support
the quality of our financial reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of
the Exchange Act) that occurred during the quarter ended December 31, 2017, that have materially affected, or were reasonably likely to
materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting is included in Item 8, Financial Statements and Supplementary Data,

and is incorporated herein by reference. The Report of Independent Registered Public Accounting Firm on Internal Control over Financial
Reporting also is included in Item 8, Financial Statements and Supplementary Data, and incorporated herein by reference.

Item 9B. Other Information

None.

179

Part III

Ally Financial Inc. • Form 10-K

Item 10. Directors, Executive Officers, and Corporate Governance
Executive Officers and Other Significant Employees

Jeffrey J. Brown — Chief Executive Officer of Ally since February 2015 and a member of the Board since February 2015. Mr. Brown,

44, is driving Ally’s evolution as a leading digital financial services company. Under his leadership, Ally is building on its strengths in
automotive financing, retail deposits and corporate financing, as well as diversifying its offerings to include digital wealth management and
online brokerage, a credit card and mortgage products. Mr. Brown has deep financial services experience, having previously served in a
variety of key leadership roles at Ally. Prior to being named CEO, Mr. Brown was president and CEO of Ally’s Dealer Financial Services
business, where he oversaw the company’s automotive finance, insurance and automotive servicing operations. Mr. Brown joined Ally in
March 2009 as corporate treasurer and, in 2011, was named executive vice president of finance and corporate planning, where he oversaw the
company’s finance, treasury and corporate strategy initiatives. Prior to joining Ally, Mr. Brown was the corporate treasurer for Bank of
America, where he had responsibility for the core treasury functions, including funding and managing interest rate risk. Mr. Brown spent 10
years at Bank of America, beginning his career in finance and later joining the balance sheet management division. During his tenure at Bank
of America, he also served as the bank’s deputy treasurer and oversaw balance sheet management and the company’s corporate funding
division. Mr. Brown received a bachelor’s degree in economics from Clemson University and an executive master’s degree in business from
Queens University in Charlotte. He serves on the Board of the Clemson University Foundation, an independent, not-for-profit entity that
promotes the welfare and future development of Clemson University. He also serves on the Trevillian Cabinet of the College of Business and
Behavioral Sciences at Clemson University and on the Board of Trustees for Queens University in Charlotte. Mr. Brown was recognized for
his commitment to family, career and community with a 2016 Father of the Year award by the Father’s Day Council and benefiting the
American Diabetes Association.

David J. DeBrunner — Vice President, Chief Accounting Officer, and Controller of Ally since September 2007. In this role, Mr.
DeBrunner, 51, is responsible for all accounting, tax, regulatory reporting, internal controls, finance shared services, and strategic sourcing
services for Ally. He joined Ally from Fifth Third Bancorp (Fifth Third) where he was senior vice president, corporate controller, and chief
accounting officer from January 2002 to August 2007. Prior to that position, he served as the chief financial officer for the commercial
division of Fifth Third. He joined Fifth Third in 1992 and held various financial leadership positions throughout the company. Prior to his
time at Fifth Third, he held positions at Deloitte and Touche LLP in the Chicago and Cincinnati offices. Mr. DeBrunner earned a bachelor’s of
science in accounting from Indiana University and is a member of the American Institute of Certified Public Accountants and the Ohio
Society of Certified Public Accountants.

Christopher A. Halmy — Chief Financial Officer of Ally since November 2013. In this role, he is responsible for the oversight of the

Company’s financial reporting, controls and analysis, accounting, and investor relations, as well as treasury activities, including capital,
funding and balance sheet management. Prior to his current position, Mr. Halmy, 49, served as Ally’s corporate treasurer since June 2011. He
joined Ally in 2009 and previously served as structured funding executive with responsibility for the strategy, planning, and execution of
securitizations and structured funding globally. In this role, he also was responsible for bank relationships and compliance related to existing
transactions in the market. Prior to joining Ally, Mr. Halmy was the global funding executive at Bank of America where he was responsible
for funding and liquidity activities. During his tenure at Bank of America, he also led the mortgage and automotive securitization group. Prior
to joining Bank of America in 1997, Mr. Halmy held treasury, finance, and accounting positions at MBNA America, N.A., Merrill Lynch &
Co., JP Morgan & Co., and Deloitte & Touche. In 2017, he also joined the board of directors of Solar Mosaic, Inc. Mr. Halmy holds a
bachelor’s degree in accounting and a master’s degree in business administration from Villanova University. In addition, he was an adjunct
professor at Wesley College from 1999 to 2006 and Queens University from 2011 to 2013. Mr. Halmy currently serves on the board of
advisors for the McColl School of Business at Queens University and the provost board at Villanova University. Mr. Halmy is also a certified
public accountant.

Jennifer A. LaClair — Chief Financial Officer Designate of Ally Financial since December 2017, with the intent that she be appointed

Chief Financial Officer effective March 1, 2018. Prior to joining Ally, Ms. LaClair, 46, spent ten years at PNC Financial Services. Most
recently, she served as the head of the business bank where she was charged with setting strategy, driving performance and managing risk.
Before that, she served as chief financial officer for all of PNC’s lines of business. Earlier in her career, Ms. LaClair was a consultant with
McKinsey and Company where she specialized in strategy, efficiency improvement, and operational transformations. She began her career in
international development in Eastern Europe, the Middle East, and West Africa. Ms. LaClair has a Master of Business Administration from
the Case Western Reserve University where she was the Class of 2001 Alumni Scholar and earned the Scott S. Cowen Outstanding
Leadership award. She graduated summa cum laude from the State University of New York at Buffalo.

Diane E. Morais — Ms. Morais joined Ally Financial in 2008, and currently has oversight for consumer and commercial banking
products. Her responsibilities include the company’s Deposits, Mortgage, Online Brokerage and Wealth Management and Corporate Finance
businesses, as well as oversight for Ally’s digital strategies. As President, Consumer & Commercial Banking Products, Ms. Morais, 52, has
responsibility for the strategic direction and profitability of the deposits franchise, product innovation and pricing, customer service, and
ensuring all activities are consistent with high standards of safety and soundness. Under her leadership, Ally Bank has achieved double-digit
retail deposit growth each year since the bank was launched in 2009. The bank now has more than 1.4 million customers, and it has received
numerous third-party accolades, including being named Best Online Bank by Money® Magazine for five consecutive years and by Kiplinger
Personal Finance for three years. Ms. Morais also led the expansion of two new products in 2016, the Ally CashBack Credit Card and Ally
Home, the bank’s direct-to-consumer mortgage business. In addition to Ally Bank, Ms. Morais has responsibility for the Online Brokerage
and Wealth Management business Ally acquired through its April 2016 acquisition of TradeKing, Inc., including oversight of the integration

180

Ally Financial Inc. • Form 10-K

and rebranding of the business under Ally. The addition of investing and wealth management significantly broadens the portfolio of personal
finance options Ally has to offer to provide consumers with a cohesive approach to managing their savings and investment alternatives, while
benefiting from the bank’s competitive rates and innovative deposit products. Prior to holding key leadership positions of increasing
responsibility at Ally, Ms. Morais achieved a number of significant professional accomplishments in the financial services sector. During a
career spanning twelve years at Bank of America, she served as the deposit and debit products executive, national customer experience
executive, card services marketing, and consumer mortgage vendor management executive. Ms. Morais also spent nine years at Citibank’s
credit card division in a variety of marketing, risk and finance roles. Ms. Morais holds a bachelor’s degree from Pennsylvania State University
and sits on the board of directors for Junior Achievement of Central Carolinas and Charlotte Center City Partners. In September 2015, Ms.
Morais was named to American Banker Magazine’s “25 Women to Watch” list, and in September 2016 and September 2017, she was ranked
#12 and #11 respectively on the publication’s “25 Most Powerful Women in Banking” list, which recognizes the professional achievements,
personal tenacity, and overall influence of the industry’s top-performing female executives. Ms. Morais was also named one of the top 25
outstanding business women in the Charlotte Business Journal’s 2018 Women in Business Awards.

Timothy M. Russi — President of Automotive Finance of Ally since 2013. Mr. Russi, 55, has responsibility for developing strategy,
driving innovation, and leading the performance of the automotive business, Ally’s largest unit and principal revenue driver. He led the
transformation of Ally’s automotive finance business from a manufacturer-owned captive to an independent market leader. In this role, Mr.
Russi has championed key digital initiatives, fostered partnerships with emerging online retailers, and led the acquisition of Clearlane.
Through these efforts, he has made Ally a go-to-partner for innovative disruptors in the automotive retail space. Previously, he was executive
vice president of North American Operations—Automotive (NAO) for U.S. and Canada and chief financial officer for Ally’s Global
Automotive Services and chief operating officer for NAO. Before joining Ally in 2008, Mr. Russi worked for Cerberus Operations and
Advisory Company as a senior advisor to Ally. He assumed this role in early 2008 after serving as the president of Dealer Financial Services
for Bank of America. Mr. Russi has more than 30 years of business and financial services industry experience, having previously served in
management and leadership positions at US Leasing (a Ford Financial Services company), Deloitte, DHR International and Ernst & Young.
Mr. Russi holds a bachelor’s degree in managerial economics from the University of California at Davis. He is a certified public accountant
and is Six Sigma certified.

David P. Shevsky — Chief Risk Officer of Ally since December 2015. In this role, Mr. Shevsky, 56, has overall responsibility for the risk

framework, processes and oversight for the Company, including achieving an appropriate balance between risk and return, mitigating
unnecessary risk and protecting the Company’s financial returns. Prior to his current role, Mr. Shevsky served as the Chief Risk Officer for
Ally Bank beginning in November 2011. Mr. Shevsky joined Ally Financial in 1986 with a series of positions supporting the automotive
finance operation from a credit analysis and risk perspective. During his career, he supported both the domestic and international automotive
finance operations. He became a senior vice president of enterprise risk for the Company in 2004. In this role, Mr. Shevsky began to take a
company-wide view of commercial credit risk and capital management. In 2006, he played a key role in establishing a more robust risk
management function, and in 2008, he was responsible for establishing a loan review function, which he did until becoming the Chief Risk
Officer for Ally Bank in 2011. Prior to joining Ally, Mr. Shevsky served in the United States Air Force from 1979 until 1984. Mr. Shevsky
holds a bachelor’s degree from Wayne State University and a master’s degree from Walsh College.

Scott A. Stengel — General Counsel of Ally since May 2016. In this role, Mr. Stengel, 46, oversees all of Ally’s legal affairs and is also
responsible for Ally’s corporate-secretarial, government-affairs, records-management, and licensing functions. He joined Ally from Kansas
City, Mo.-based UMB Financial Corporation, where he served as executive vice president, general counsel, and corporate secretary. Before
that, he was a partner at King & Spalding LLP and Orrick, Herrington & Sutcliffe LLP in Washington, DC, with a practice focused on
banking, capital markets, and government relations. He began his career as a law clerk to the Honorable Douglas O. Tice, Jr. in Richmond, Va.
He received a bachelor’s degree in economics, with highest honors, from the University of Notre Dame and a juris doctorate, magna cum
laude, from the Notre Dame Law School.

Additional Information

Additional information in response to this Item 10 can be found in the Company’s 2018 Proxy Statement under “Proposal 1 — Election

of Directors,” “The Board’s Leadership Structure,” and “Code of Conduct and Ethics and Review, Approval or Ratification of Transactions
with Related Persons.” That information is incorporated into this item by reference.

181

Ally Financial Inc. • Form 10-K

Item 11. Executive Compensation

Items in response to this Item 11 can be found in the Company’s 2018 Proxy Statement under “Executive Compensation.” That

information is incorporated into this item by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Items in response to this Item 12 can be found in the Company’s 2018 Proxy Statement under “Security Ownership of Certain Beneficial

Owners,” and “Executive Compensation.” That information is incorporated into this item by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Items in response to this Item 13 can be found in the Company’s 2018 Proxy Statement under “Code of Conduct and Ethics and Review,

Approval or Ratification of Transactions with Related Persons.” That information is incorporated into this item by reference.

Item 14. Principal Accountant Fees and Services

Items in response to this Item 14 can be found in the Company’s 2018 Proxy Statement under “Audit Committee Report.” That

information is incorporated into this item by reference.

182

Part IV

Ally Financial Inc. • Form 10-K

Item 15. Exhibits, Financial Statement Schedules

The exhibits listed on the accompanying Index of Exhibits are filed or incorporated by reference as a part of this report. This Index is

incorporated herein by reference. Certain financial statements schedules have been omitted because prescribed information has been
incorporated into our Consolidated Financial Statements or notes thereto.

Exhibit
3.1

Description
Form of Amended and Restated Certificate of Incorporation

3.2

4.1

4.1.1

4.1.2

4.1.3

4.1.4

4.1.5

4.2

4.2.1

4.2.2

4.2.3

4.2.4

4.3

4.3.1

4.3.2

4.3.3

Ally Financial Inc. Amended and Restated Bylaws

Form of Indenture dated as of July 1, 1982, between the
Company and Bank of New York (Successor Trustee to
Morgan Guaranty Trust Company of New York), relating to
Debt Securities

Form of First Supplemental Indenture dated as of
April 1, 1986, supplementing the Indenture designated as
Exhibit 4.1

Form of Second Supplemental Indenture dated as of
June 15, 1987, supplementing the Indenture designated as
Exhibit 4.1

Form of Third Supplemental Indenture dated as of
September 30, 1996, supplementing the Indenture
designated as Exhibit 4.1

Form of Fourth Supplemental Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.1

Form of Fifth Supplemental Indenture dated as of
September 30, 1998, supplementing the Indenture
designated as Exhibit 4.1

Form of Indenture dated as of September 24, 1996, between
the Company and The Chase Manhattan Bank, Trustee,
relating to Term Notes

Form of First Supplemental Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.2

Method of Filing
Filed as Exhibit 3.1 to the Company’s Current Report on
Form 8-K dated as of March 14, 2014, (File No. 1-3754),
incorporated herein by reference.

Filed as Exhibit 3.1 to the Company’s Current Report on
Form 8-K dated as of March 22, 2016, (File No. 1-3754),
incorporated herein by reference.

Filed as Exhibit 4(a) to the Company’s Registration
Statement No. 2-75115, incorporated herein by reference.

Filed as Exhibit 4(g) to the Company’s Registration
Statement No. 33-4653, incorporated herein by reference.

Filed as Exhibit 4(h) to the Company’s Registration
Statement No. 33-15236, incorporated herein by reference.

Filed as Exhibit 4(i) to the Company’s Registration
Statement No. 333-33183, incorporated herein by reference.

Filed as Exhibit 4(j) to the Company’s Registration
Statement No. 333-48705, incorporated herein by reference.

Filed as Exhibit 4(k) to the Company’s Registration
Statement No. 333-75463, incorporated herein by reference.

Filed as Exhibit 4 to the Company’s Registration Statement
No. 333-12023, incorporated herein by reference.

Filed as Exhibit 4(a)(1) to the Company’s Registration
Statement No. 333-48207, incorporated herein by reference.

Form of Second Supplemental Indenture dated as of
June 20, 2006, supplementing the Indenture designated as
Exhibit 4.2

Filed as Exhibit 4(a)(2) to the Company’s Registration
Statement No. 333-136021, incorporated herein by
reference.

Form of Third Supplemental Indenture dated as of August
24, 2012, supplementing the Indenture designated as
Exhibit 4.2

Filed as Exhibit 4.1.3 to the Company’s Registration
Statement No. 333-183535, incorporated herein by
reference.

Form of Fourth Supplemental Indenture dated as of August
24, 2012, supplementing the Indenture designated as
Exhibit 4.2

Filed as Exhibit 4.1.4 to the Company’s Registration
Statement No. 333-183535, incorporated herein by
reference.

Form of Indenture dated as of October 15, 1985, between
the Company and U.S. Bank Trust (Successor Trustee to
Comerica Bank), relating to Demand Notes

Form of First Supplemental Indenture dated as of
April 1, 1986, supplementing the Indenture designated as
Exhibit 4.3

Form of Second Supplemental Indenture dated as of
June 24, 1986, supplementing the Indenture designated as
Exhibit 4.3

Form of Third Supplemental Indenture dated as of
February 15, 1987, supplementing the Indenture designated
as Exhibit 4.3

Filed as Exhibit 4 to the Company’s Registration Statement
No. 2-99057, incorporated herein by reference.

Filed as Exhibit 4(a) to the Company’s Registration
Statement No. 33-4661, incorporated herein by reference.

Filed as Exhibit 4(b) to the Company’s Registration
Statement No. 33-6717, incorporated herein by reference.

Filed as Exhibit 4(c) to the Company’s Registration
Statement No. 33-12059, incorporated herein by reference.

183

Ally Financial Inc. • Form 10-K

Exhibit
4.3.4

Description
Form of Fourth Supplemental Indenture dated as of
December 1, 1988, supplementing the Indenture designated
as Exhibit 4.3

Form of Fifth Supplemental Indenture dated as of
October 2, 1989, supplementing the Indenture designated as
Exhibit 4.3

Form of Sixth Supplemental Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.3

Form of Seventh Supplemental Indenture dated as of
June 9, 1998, supplementing the Indenture designated as
Exhibit 4.3

Method of Filing
Filed as Exhibit 4(d) to the Company’s Registration
Statement No. 33-26057, incorporated herein by reference.

Filed as Exhibit 4(e) to the Company’s Registration
Statement No. 33-31596, incorporated herein by reference.

Filed as Exhibit 4(f) to the Company’s Registration
Statement No. 333-56431, incorporated herein by reference.

Filed as Exhibit 4(g) to the Company’s Registration
Statement No. 333-56431, incorporated herein by reference.

Form of Eighth Supplemental Indenture dated as of January
4, 2012, supplementing the Indenture designated as
Exhibit 4.3

Filed as Exhibit 4.1.8 to the Company’s Registration
Statement No. 333-178919, incorporated herein by
reference.

Form of Indenture dated as of December 1, 1993, between
the Company and Citibank, N.A., Trustee, relating to
Medium Term Notes

Form of First Supplemental Indenture dated as of
January 1, 1998, supplementing the Indenture designated as
Exhibit 4.4

Indenture, dated as of December 31, 2008, between the
Company and The Bank of New York Mellon, Trustee

Filed as Exhibit 4 to the Company’s Registration Statement
No. 33-51381, incorporated herein by reference.

Filed as Exhibit 4(a)(1) to the Company’s Registration
Statement No. 333-59551, incorporated herein by reference.

Filed as Exhibit 4.2 to the Company’s Current Report on
Form 8-K dated as of January 2, 2009, (File No. 1-3754),
incorporated herein by reference.

Amended and Restated Indenture, dated March 1, 2011,
between the Company and The Bank of New York Mellon,
Trustee

Filed as Exhibit 4.2 to the Company’s Current Report on
Form 8-K dated as of March 4, 2011 (File No. 1-3754),
incorporated herein by reference.

Form of Guarantee Agreement related to Ally Financial Inc.
Senior Unsecured Guaranteed Notes

Form of Fixed Rate Senior Unsecured Note

Form of Floating Rate Senior Unsecured Note

Form of Subordinated Indenture to be entered into between
the Company and The Bank of New York Mellon, as Trustee

Filed as Exhibit 4.10 to the Company’s Registration
Statement No. 333-193070, incorporated herein by
reference.

Filed as Exhibit 4.8 to the Company’s Registration
Statement No. 333-193070, incorporated herein by
reference.

Filed as Exhibit 4.9 to the Company’s Registration
Statement No. 333-193070, incorporated herein by
reference.

Filed as Exhibit 4.11 to the Company’s Registration
Statement No. 333-193070, incorporated herein by
reference.

Form of Subordinated Note

Included in Exhibit 4.10.

Second Amended and Restated Declaration of Trust by and
between the trustees of each series of GMAC Capital Trust
I, Ally Financial Inc., as Sponsor, and by the holders, from
time to time, of undivided beneficial interests in the relevant
series of GMAC Capital Trust I, dated as of March 1, 2011

Series 2 Trust Preferred Securities Guarantee Agreement
between Ally Financial Inc. and The Bank of New York
Mellon, dated as of March 1, 2011

Indenture, dated as of November 20, 2015, between the
Company and The Bank of New York Mellon, Trustee

Filed as Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated as of March 4, 2011 (File No. 1-3754),
incorporated herein by reference.

Filed as Exhibit 4.3 to the Company’s Current Report on
Form 8-K dated as of March 4, 2011 (File No. 1-3754),
incorporated herein by reference.

Filed as Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated as of November 20, 2015,
(File No. 1-3754), incorporated herein by reference

Form of Subordinated Note

Form of Ally Financial Inc. 2018 Executive Performance
Plan

Form of Ally Financial Inc. 2017 Incentive Compensation
Plan

Included in Exhibit 4.14

Filed herewith.

184

4.3.5

4.3.6

4.3.7

4.3.8

4.4

4.4.1

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

4.13

4.14

4.15

10.1

10.2

Ally Financial Inc. • Form 10-K

Exhibit
10.3

Description
Form of Ally Financial Inc. Employee Stock Purchase Plan

Method of Filing
Filed as Exhibit 3.7 to the Company's Current Report on
Form 8-K dated as of March 14, 2014 (File No. 1-3754),
incorporated herein by reference.

Form of Ally Financial Inc. 2017 Non-Employee Directors
Equity Compensation Plan

Filed herewith.

Ally Financial Inc. Severance Plan, Plan Document and
Summary Plan Description, as amended

10.5.1

Amendment no. 1 to the Ally Financial Inc. Severance Plan
Document and Summary Plan Description

Ally Financial Inc. Non-Employee Directors Deferred
Compensation Plan

Form of Award Agreement related to the issuance of
Performance Stock Units

Form of Award Agreement related to the issuance of
Restricted Stock Units

Form of Award Agreement related to the issuance of Key
Contributor Stock Units

Form of Award Agreement related to the issuance of an Ally
Leader Equity Participation Award

Form of Award Agreement related to the issuance of
Restricted Stock Awards

Consent Order, dated December 23, 2013 (Department of
Justice)

Consent Order, dated December 19, 2013 (Consumer
Financial Protection Bureau)

Filed as Exhibit 10.6 to the Company’s Annual Report for
the period ended December 31, 2015, on Form 10-K
(File No. 1-3754), incorporated herein by reference.

Filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated as of December 29, 2017 (File No. 1-3754),
incorporated herein by reference.

Filed herewith.

Filed as Exhibit 10.10 to the Company’s Annual Report for
the period ended December 31, 2016, on Form 10-K (File
No. 1-03754), incorporated herein by reference.

Filed herewith.

Filed as Exhibit 10.34 to the Company’s Annual Report for
the period ended December 31, 2013, on Form 10-K
(File No. 1-3754), incorporated herein by reference.

Filed as Exhibit 10.35 to the Company’s Annual Report for
the period ended December 31, 2013, on Form 10-K
(File No. 1-3754), incorporated herein by reference.

Stipulation and Consent to the Issuance of a Consent Order,
dated December 19, 2013 (Consumer Financial Protection
Bureau)

Filed as Exhibit 10.36 to the Company’s Annual Report for
the period ended December 31, 2013, on Form 10-K
(File No. 1-3754), incorporated herein by reference.

Computation of Ratio of Earnings to Fixed Charges

Ally Financial Inc. Subsidiaries as of December 31, 2017

Filed herewith.

Consent of Independent Registered Public Accounting Firm

Filed herewith.

Certification of Principal Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a)

Certification of Principal Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a)

Certification of Principal Executive Officer and Principal
Financial Officer pursuant to 18 U.S.C. Section 1350

The following information from our 2017 Annual Report on
Form 10-K, formatted in eXtensible Business Reporting
Language: (i) Consolidated Statement of Income, (ii)
Consolidated Statement of Comprehensive Income, (iii)
Consolidated Balance Sheet, (iv) Consolidated Statement of
Changes in Equity, (v) Consolidated Statement of Cash
Flows, and (vi) the Notes to the Consolidated Financial
Statements.

Filed herewith.

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

23.1

31.1

31.2

101

Item 16. Form 10-K Summary

None.

185

Signatures

Ally Financial Inc. • Form 10-K

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual

Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, this 21st day of February, 2018.

Ally Financial Inc.
(Registrant)

/S/ JEFFREY J. BROWN

Jeffrey J. Brown

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the

following persons on behalf of the Registrant and in the capacities indicated, this 21st day of February, 2018.

/S/ JEFFREY J. BROWN

Jeffrey J. Brown

Chief Executive Officer

/S/ DAVID J. DEBRUNNER

David J. DeBrunner

Vice President, Chief Accounting Officer, and
Corporate Controller

/S/ CHRISTOPHER A. HALMY

Christopher A. Halmy

Chief Financial Officer

186

Signatures

Ally Financial Inc. • Form 10-K

/S/ FRANKLIN W. HOBBS
Franklin W. Hobbs
Ally Chairman

/S/ KENNETH J. BACON
Kenneth J. Bacon
Director

/S/ ROBERT T. BLAKELY
Robert T. Blakely
Director

/S/ MAUREEN A. BREAKIRON-EVANS
Maureen A. Breakiron-Evans
Director

/S/ JEFFREY J. BROWN
Jeffrey J. Brown
Chief Executive Officer and Director

/S/ WILLIAM H. CARY
William H. Cary
Director

/S/ MAYREE C. CLARK
Mayree C. Clark
Director

/S/ KIM S. FENNEBRESQUE
Kim S. Fennebresque
Director

/S/ MARJORIE MAGNER
Marjorie Magner
Director

/S/ JACK J. STACK
John J. Stack
Director

/S/ MICHAEL F. STEIB
Michael F. Steib
Director

187

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LEADERSHIP

BOARD OF DIRECTORS

Franklin W. Hobbs
Chief Executive Officer,
Ribbon Communications Inc.

Maureen A. Breakiron-Evans
Former Chief Financial Officer,
Towers Perrin

Kenneth J. Bacon
Former Executive Officer,
Fannie Mae

Robert T. Blakely
Former Chief Financial
Officer, Several NYSE
publicly-traded companies

Jeffrey J. Brown
Chief Executive Officer,
Ally Financial

William H. Cary
Former Executive Officer,
General Electric Company

E XECUTIVE MANAGEMENT

Jeffrey J. Brown
Chief Executive Officer

Michael Baresich
Chief Information Officer

Andrea Brimmer
Chief Marketing and
Public Relations Officer

Bradley Brown
Corporate Treasurer

Dinesh Chopra
Chief Strategy Officer

David DeBrunner
Controller and
Chief Accounting Officer

William Hall, Jr.
President and CEO,
Ally Corporate Finance

Jennifer LaClair
Chief Financial Officer

Diane Morais
President,
Consumer and Commercial
Banking Products

COMPANY INFORM ATI ON

Headquarters
Ally Financial Inc.
Ally Detroit Center
500 Woodward Avenue
Detroit, MI 48226
www.ally.com

Corporate Center
Charlotte, NC

Investor Relations
1-866-710-4623
investor.relations@ally.com
ally.com/about/investor

Michael Brown
Executive Director
Investor Relations
704-444-5225
michael.t.brown@ally.com

13 A LLY 2017 ANNUAL REPORT

Mayree C. Clark
Former Executive Officer,
Morgan Stanley

Kim S. Fennebresque
Former Chairman and
CEO, Cowen Group, Inc.

Marjorie Magner
Former Executive,
Citigroup

John J. Stack
Former Chairman
and CEO, Ceska
Sporitelna, A.S.

Michael F. Steib
Chief Executive Officer,
XO Group

Kathleen L. Patterson
Chief Human Resources
Officer

Stephanie Richard
General Auditor

Tim Russi
President, Auto Finance

Dan Soto
Chief Compliance Officer

Scott Stengel
General Counsel

Alison Summerville
Business Administration
Executive

Jason Schugel
Deputy Chief Risk Officer

Douglas Timmerman
President, Insurance

David Shevsky
Chief Risk Officer

Stock Transfer Agent
Computershare
P.O. Box 505000
Louisville, KY
40233-5000

Media Relations
media.ally.com
Twitter: @ally