Ally Financial Inc. (ALLY) FY 2023 MD&A

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 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 governmental agencies, central banks, or supranational authorities;

•changes in accounting standards or policies;

•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 type, ownership, and use;

•any instability or breakdown in the financial system, including as a result of the failure of a financial institution or other participants in it (such as the banking failures during 2023);

•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 business lines, including mortgage lending, credit cards, corporate finance, brokerage, and personal advice;

•our ability to develop capital plans acceptable to the FRB and our ability to implement them, including any payment of dividends or share repurchases;

•our ability to conduct appropriate stress tests and effectively plan for and manage capital or liquidity consistent with evolving business or operational needs, risk-management standards, and regulatory or supervisory requirements or expectations;

•our ability to cost-effectively fund our business and operations, including through deposits (which could be subject to sudden withdrawals) and the capital markets;

•changes in any credit rating assigned to Ally, including Ally Bank, or the ratings for our insurance business;

•adverse publicity or other reputational harm to us, our service providers, 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;

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•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;

•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;

•our ability to address heightened scrutiny and expectations from supervisory or other governmental authorities and to timely and credibly remediate related concerns or deficiencies;

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

•the potential outcomes of judicial, regulatory, or administrative inquiries, examinations, investigations, proceedings, or disputes to which we are or may be subject, and our ability to absorb and address any damages or other remedies that are sought or awarded, and any collateral consequences;

•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 manage and mitigate security risks, including our capacity to withstand cyberattacks;

•our ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or infrastructure;

•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, such as artificial intelligence, that affect us or our customers, counterparties, service providers, or competitors or to maintain rights or interests in associated intellectual property;

•our ability to successfully make acquisitions or divestitures or to integrate acquired businesses;

•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, cyber-warfare, and pandemics;

•our ability to maintain appropriate ESG practices, oversight, and disclosures;

•policies and other actions of governments to manage and mitigate climate and related environmental risks, and the effects of climate change or the transition to a lower-carbon economy on our business, operations, and reputation; 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.

Unless the context otherwise requires, the following definitions apply. The term “loans” means the following consumer and commercial products associated with our direct and indirect financing activities: loans, retail installment sales contracts, lines of credit, and other financing products excluding operating leases. The term “operating leases” means consumer- and commercial-vehicle lease agreements where Ally is the lessor and the lessee is generally not obligated to acquire ownership of the vehicle at lease-end or compensate Ally for the vehicle’s residual value. The terms “lend,” “finance,” and “originate” mean our direct extension or origination of loans, our purchase or acquisition of loans, or our purchase of operating leases, as applicable. The term “consumer” means all consumer products associated with our

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loan and operating-lease activities and all commercial retail installment sales contracts. The term “commercial” means all commercial products associated with our loan activities, other than commercial retail installment sales contracts. The term “partnerships” means business arrangements rather than partnerships as defined by law.

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Overview

Ally Financial Inc. (together with its consolidated subsidiaries unless the context otherwise requires, Ally, the Company, we, us, or our) is a financial-services company with the nation’s largest all-digital bank and an industry-leading automotive financing and insurance business, driven by a mission to “Do It Right” and be a relentless ally for customers and communities. The Company serves customers through a full range of online banking services (including deposits, mortgage lending, point-of-sale personal lending and credit-card products) and securities brokerage and investment advisory services. The Company also includes a corporate finance business that offers capital for equity sponsors and middle-market companies. On December 31, 2023, we committed to sell our point-of-sale financing business, Ally Lending. Refer to Note 2 to the Consolidated Financial Statements for further information. Ally is a Delaware corporation and is registered as a BHC under the BHC Act, and an FHC under the GLB Act.

Our Business

Dealer Financial Services

Dealer Financial Services is composed of our Automotive Finance and Insurance segments. Our primary customers are automotive dealers, which includes OEM-franchised dealers, non-OEM-franchised dealers with a national presence, and automotive retailers, such as Carvana, CarMax, and EchoPark. A dealer may sell or lease a vehicle for cash but, more typically, enters into a retail installment sales contract or operating lease with the customer and then sells the retail installment sales contract or the operating lease and the leased vehicle, as applicable, to Ally or another automotive-finance provider. The purchase by Ally or another provider is commonly described as indirect automotive lending to the customer.

Our Dealer Financial Services business 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 automotive dealerships and their customers. We have deep dealer relationships that have been built throughout our over 100-year history, and we are leveraging competitive strengths to expand our dealer footprint. Our business model encourages dealers to use our broad range of products through incentive programs like our Ally Dealer Rewards program. Our automotive finance services include purchasing retail installment sales contracts and operating leases from dealers and automotive retailers, extending automotive loans directly to consumers, offering term loans to dealers, financing dealer floorplans and providing other lines of credit to dealers, supplying warehouse lines to automotive retailers, offering automotive-fleet financing, providing financing to companies and municipalities for the purchase or lease of vehicles, and supplying vehicle-remarketing services. We also offer retail VSCs and commercial insurance primarily covering dealers’ vehicle inventories. We are a leading provider of VSCs, GAP, and VMCs. Our dealer-centric business model, value-added products and services, full-spectrum financing, and business expertise proven over many credit cycles, make us a premier automotive finance and insurance company ready to support and strengthen our approximately 22,000 active dealer relationships. A dealer is considered to have an active relationship with us if we provided automotive financing, remarketing, or insurance services during the three months ended December 31, 2023.

Automotive Finance

Our Automotive Finance operations provide U.S.-based automotive financing services to consumers, automotive dealers and retailers, other businesses, and municipalities. Our business model, value-added products and services, full-spectrum financing, and business expertise proven over many credit cycles make us a premier automotive finance company. At December 31, 2023, our Automotive Finance operations had $115.4 billion of assets and generated $5.7 billion of total net revenue in 2023. For consumers, we provide financing for new and used vehicles. In addition, our CSG provides automotive financing for small businesses and municipalities. At December 31, 2023, our CSG had $10.2 billion of loans outstanding. Through our commercial automotive financing operations, we fund purchases of new and used vehicles through wholesale floorplan financing. We manage commercial account servicing on approximately 2,700 dealers that utilize our floorplan inventory lending or other commercial loans. We serviced $86.0 billion consumer loan and operating leases at December 31, 2023, and our commercial automotive loan portfolio was approximately $23.3 billion at December 31, 2023. The extensive infrastructure, technology, and analytics of our servicing operations, as well as the experience of our servicing personnel, enhance our ability to manage our loan losses and enable us to deliver a favorable customer experience to both our dealers and retail customers. During 2023, we continued to reposition our origination profile to focus on capital optimization and risk-adjusted returns. In 2023, total consumer automotive originations were $40.0 billion, a decrease of $6.4 billion compared to 2022. The shorter-term duration consumer automotive loan and variable-rate commercial loan portfolios offer attractive asset classes where we continue to optimize risk-adjusted returns through origination mix management and pricing and underwriting discipline.

Our success as an automotive finance provider is driven by the consistent and broad range of products and services we offer to dealers and automotive retailers. The automotive marketplace is dynamic and evolving, including substantial investments in electrification by automotive manufacturers and suppliers. We continue to identify and cultivate relationships with automotive retailers, including those with leading e-commerce platforms. We also operate an online direct-lending platform for consumers seeking direct financing. 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. Furthermore, our strong and expansive dealer relationships, comprehensive suite of products and services, full-spectrum financing, and depth of experience position us to evolve with future shifts in automobile technologies, including electrification. We have provided and continue to provide automobile financing for battery-electric and plug-in hybrid vehicles, including brands such as Jeep, Tesla, Ford, and BMW. This positions us to remain a leader in automotive financing as we believe the majority of these vehicles will be sold through dealerships and automotive retailers with whom we have an established relationship. Additionally, we continue to partner and build relationships with automotive manufacturers who use a direct-to-consumer model. During the year ended December 31, 2023, $935 million of our consumer automotive retail loan originations and purchases, and $712 million of our operating lease originations and purchases, were for

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battery-electric and plug-in hybrid vehicles. As of December 31, 2023, $1.3 billion of our consumer automotive finance receivables and loans had battery-electric or plug-in hybrid vehicles as the underlying collateral, and $969 million of our investment in operating leases were battery-electric or plug-in hybrid vehicles.

We have focused on developing dealer relationships beyond those relationships that primarily were developed through our previous role as a captive finance company for GM and Stellantis. We have established relationships with thousands of automotive dealers through our customer-centric approach and specialized incentive programs designed to drive loyalty amongst dealers to our products and services. Outside of GM and Stellantis, our other OEM-franchised dealers include brands such as Ford, Toyota, Hyundai, Kia, Nissan, Honda, and others, while our non-OEM-franchised dealers and automotive retailers include used-vehicle-only retailers with a national presence, as well as online-only automotive retailers, such as Carvana, CarMax, and EchoPark.

Over the past several years, we have continued to focus on the consumer used-vehicle segment, primarily through franchised dealers and automotive retailers. This has resulted in used-vehicle financing volume growth, and has positioned us as an industry leader in used-vehicle financing. The highly fragmented used-vehicle financing market, with a total financing opportunity represented by approximately 289 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. As of December 31, 2023, approximately 71% of our dealer relationships were with franchised dealers.

During 2023, we continued our focus on meeting the needs of both dealers and consumer customers through expansion of our pass through programs. The pass through program creates financing opportunities for customers in the retail automotive channel, whereby we are able to acquire retail installment sales contracts through an originate-to-sell platform and execute whole-loan sales with third-party investors. At December 31, 2023, and December 31, 2022, the consumer automotive whole-loan serviced portfolio related to our pass through program was $956 million and $227 million, respectively.

For consumers, we provide automotive loan financing and leasing for approximately 4.1 million new and used vehicle contracts. Retail financing for the purchase of vehicles by individual consumers generally takes the form of installment sales financing. We originated a total of approximately 1.2 million and 1.3 million automotive loans and operating leases during the years ended December 31, 2023, and 2022, respectively, totaling $40.0 billion and $46.4 billion.

Our consumer automotive financing operations generate revenue primarily through finance charges on retail installment sales contracts and rental payments on operating lease contracts. For operating leases, when the contract is originated, we estimate the residual value of the leased vehicle at lease termination. Periodically thereafter 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. While all operating 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. Refer to the Operating Lease Residual Risk Management and Critical Accounting Estimates sections of this MD&A for further discussion of credit risk and lease residual risk.

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 increasingly reflect our ongoing strategy to grow used vehicle financing and expand risk-adjusted returns. While we predominately focus on prime-lending markets, we seek to be a meaningful source of financing to a wide spectrum of customers and continue to carefully measure risk versus return. We place great emphasis on our risk management and risk-based pricing policies and practices and employ robust credit decisioning processes coupled with granular pricing that is differentiated across our proprietary credit tiers.

Our commercial automotive financing operations primarily fund inventory purchases of new and used vehicles by dealers, 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 or other credit enhancements (for example, 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, subject to payment curtailment schedules. 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 2023, we financed an average of $14.2 billion of dealer vehicle inventory through wholesale floorplan financings. Other commercial automotive lending products, which averaged $6.0 billion during 2023, consist of automotive dealer revolving lines of credit, term loans, including those to finance dealership land and buildings, and dealer fleet 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. SmartAuction provides diversified fee-based revenue and serves as a means of deepening relationships with our dealership customers. In 2023, Ally and other parties, including dealers, fleet rental companies, and financial institutions, utilized SmartAuction to sell approximately 505,000 vehicles to dealers and other commercial customers. SmartAuction served as the remarketing channel for 18% of our 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. We serve approximately 2.5 million consumers nationwide across F&I

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and P&C products. In addition, we offer F&I products in Canada, where we serve more than 400 thousand consumers and are the preferred VSC and other protection plan provider for GM Canada and VSC provider for Subaru Canada. Additionally, during the third quarter of 2022, we entered into a long-term commitment to continue as the preferred VSC and other protection plan provider for GM Canada. Our Insurance operations had $9.1 billion of assets at December 31, 2023, and generated $1.5 billion of total net revenue during 2023. As part of our focus on offering dealers a broad range of consumer F&I products, we offer VSCs, VMCs, and GAP products. Ally Premier Protection is our flagship VSC offering, which provides coverage for new and used vehicles of virtually all makes and models. We also underwrite ClearGuard on the SmartAuction platform, which is a protection product designed to minimize the risk to dealers from arbitration claims for eligible vehicles sold at auction. Additionally, we underwrite selected commercial insurance coverages, which primarily insure dealers’ wholesale vehicle inventory, and offer additional products to protect a dealer’s business, including property and liability coverage that is underwritten by a third-party carrier with a portion of the insurance risk assumed through a quota share agreement. On a smaller scale, we also periodically assume other insurance risks through quota share arrangements and perform services as an underwriting carrier for an insurance program managed by a third-party where we cede the majority of such business to external reinsurance markets.

From a dealer perspective, Ally provides significant value and expertise, which creates high retention rates and strong relationships. In addition to our product offerings, we provide consultative services and training to assist dealers in optimizing F&I results while achieving high levels of customer satisfaction and regulatory compliance. We also advise dealers regarding necessary liability and physical damage coverages.

Our F&I products are primarily distributed indirectly through the automotive dealer network. We have established approximately 1,700 F&I dealer relationships nationwide and 600 dealer relationships in Canada, with a focus on growing dealer relationships in the future. 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. We also offer GAP products, which cover certain amounts owed by a customer beyond their covered vehicle’s value in the event the vehicle is damaged or stolen and declared a total loss. We continue to evolve our product suite and digital capabilities to position our business for future opportunities through growing third-party relationships and sales through our online direct-lending platform.

We have approximately 3,100 dealer relationships within our P&C business to whom we offer a variety of commercial products and levels of coverage. Vehicle inventory insurance for dealers provides physical damage protection for dealers’ floorplan vehicles. Dealers who receive wholesale financing from us are eligible for insurance incentives such as automatic eligibility for our preferred insurance programs.

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.

Mortgage Finance

Our Mortgage Finance operations consist of the management of held-for-investment and held-for-sale consumer mortgage loan portfolios. Our held-for-investment portfolio includes our direct-to-consumer Ally Home mortgage offering, and bulk purchases of high-quality jumbo and LMI mortgage loans originated by third parties. Our Mortgage Finance operations had $18.5 billion of assets at December 31, 2023, and generated $227 million of total net revenue in 2023.

Through our direct-to-consumer channel, we offer a variety of competitively priced jumbo and conforming fixed- and adjustable-rate mortgage products through a third-party. Under our current arrangement, our direct-to-consumer conforming mortgages are originated as held-for-sale and sold, while jumbo and LMI mortgages are originated as held-for-investment and subserviced by a third party. Loans originated in the direct-to-consumer channel are sourced by existing Ally customer marketing, prospect marketing on third-party websites, and email or direct mail campaigns. In April 2019, we announced a strategic partnership with BMC, which delivers an enhanced end-to-end digital mortgage experience for our customers through our direct-to-consumer channel. Through this partnership, BMC conducts the sales, processing, underwriting, and closing for Ally’s digital mortgage offerings in a highly innovative, scalable, and cost-efficient manner, while Ally retains control of all the marketing and advertising strategies and loan pricing. This partnership with BMC limits operational volatility as the mortgage industry continues to evolve in the current interest rate environment. During the year ended December 31, 2023, we originated $1.0 billion of mortgage loans through our direct-to-consumer channel. During 2018, we made a strategic equity investment in the parent of BMC (BMC Holdco) that was subsequently increased in 2019 and 2020. This investment was transferred from nonmarketable equity investments to equity securities on the Consolidated Balance Sheet during 2023, as our investment converted into publicly traded common stock in BHF. The carrying value of this investment was $16 million as of December 31, 2023, and is included in Corporate and Other. Refer to the Market Risk section of this MD&A and Note 13 to the Consolidated Financial Statements for more information.

Through the bulk loan channel, we purchase loans from several qualified sellers, including direct originators and large aggregators who have the financial capacity to support strong representations and warranties, and the industry knowledge and experience to originate high-quality assets. Bulk purchases are made on a servicing-released basis, allowing us to directly oversee servicing activities and manage refinancing through our direct-to-consumer channel. During the year ended December 31, 2023, we purchased $21 million of mortgage loans that were originated by third parties, primarily to fulfill our CRA objectives. Our mortgage loan purchases are held-for-investment.

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The combination of our direct-to-consumer strategy and bulk portfolio purchase program 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.

Corporate Finance

Our Corporate Finance operations primarily offer senior-secured loans to private equity sponsor-owned U.S.-based middle-market companies and to facilities managed by well-established asset managers that mostly provide leveraged loans. The portfolio is composed of floating-rate leveraged asset-based and cash flow/enterprise value loans. Our Corporate Finance operations had $11.2 billion of assets at December 31, 2023, and generated $501 million of total net revenue during 2023, and continues to offer attractive returns and diversification benefits to our broader lending portfolio. We believe our growing 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. We have continued to prudently grow our lending portfolio with a focus on a disciplined and selective approach to credit quality, including a greater focus on asset-based loans. As of December 31, 2023, 65% of our loans and 62% of our lending commitments were asset based, with 99.9% in a first-lien position. We seek markets and opportunities where our clients require customized, highly structured, and time-sensitive financing solutions.

Our Sponsor Finance business focuses on companies owned by private-equity sponsors with loans typically used for leveraged buyouts, refinancing and recapitalizations, mergers and acquisitions, growth, turnarounds, and debtor-in-possession financings. Additionally, our Lender Finance business provides asset managers with facilities to partially fund their direct-lending activities. We also provide a commercial real estate product, currently focused on lending to skilled nursing facilities, senior housing, and medical office buildings. Sponsor Finance loan facilities typically include both a revolver and term loan component. Our target commitment hold level for these individual exposures ranges from $15 million to $150 million, depending on product type. Additionally, hold sizes in our Lender Finance business range from $50 million to $750 million. 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 financing commitments in excess of our target hold levels to our customers and generate loan syndication fee income while reducing our risk exposure to individual borrowers. All our loans are floating-rate facilities with maturities typically ranging from two to seven years. In certain instances, we may be offered the opportunity to make small equity investments in our borrowers, which provides an additional revenue opportunity for our business. The portfolio is well diversified across multiple industries including financials, services, manufacturing distribution, and other specialty sectors. These specialty sectors include technology/venture finance, and defense and aerospace. Other smaller complementary product offerings that help strengthen our reputation as a full-spectrum provider of financing solutions for borrowers include issuing letters of credit through Ally Bank and selectively offering second-out loans on certain transactions. For additional information regarding industry concentration of our Corporate Finance operations, refer to the Corporate Finance section of this MD&A.

Corporate and Other

Overview

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 FTP and treasury ALM activities. Corporate and Other also includes activity related to certain equity investments, which primarily consist of FHLB and FRB stock, as well as other equity investments through Ally Ventures, our strategic investment business. Additionally, Corporate and Other includes the management of our legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, CRA loans and investments, and reclassifications and eliminations between the reportable operating segments. Costs that are not allocated to our reportable operating segments as part of our COH methodology, which involves management judgment, are also included in Corporate and Other.

Ally Invest

Corporate and Other includes the results of Ally Invest, our digital brokerage and advisory offering, which enables us to complement our competitive deposit products with low-cost investing. The digital advisory business aligns with our strategy to create a premier digital financial services company and provides additional sources of fee income through asset management and certain other fees, with minimal balance sheet utilization. This business also provides an additional source of low-cost deposits through arrangements with Ally Invest’s clearing broker.

Ally Invest offers a broad array of products through a fully integrated digital consumer platform centered around self-directed products and advisory services. Ally Invest’s suite of commission-free and low-cost investing options serve both active and passive investors with diverse and evolving financial objectives through a transparent online process. Our digital platform and broad product offerings are enhanced by outstanding client-focused and user-friendly customer service that is generally accessible twenty-four hours a day, seven days a week, via the phone, web or email—consistent with the Ally brand.

Ally Invest provides clients with self-directed trading services for a variety of securities including stocks, options, 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.

Ally Invest also provides advisory services to clients through web-based solutions, informational resources, and virtual interaction through Ally Invest Advisors, an SEC-registered investment advisor. Ally Invest Advisors provides clients the opportunity to obtain

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professional portfolio management services in return for a fee based upon the client’s assets under management. In addition to customized advice from personal advisors, we offer cash enhanced portfolios that incur no management fee, and a number of core robo portfolios, which hold ETFs diversified across asset class, industry sector, and geography and which are customized for clients based on risk tolerance, investment time horizon, and wealth ratio.

Ally Lending

Ally Lending is also included within Corporate and Other and primarily serves home improvement and medical service providers by enabling promotional and fixed rate installment-loan products through a digital application process at point-of-sale. The home improvement vertical had originations of $1.1 billion during the year ended December 31, 2023, which represented approximately 71% of originations. On December 31, 2023, we committed to sell our point-of-sale financing business, Ally Lending. Refer to Note 2 to the Consolidated Financial Statements for further information.

Ally Credit Card

Financial information related to our credit card business, Ally Credit Card, is included within Corporate and Other. Ally Credit Card is our scalable, digital-first credit card platform that features leading-edge technology, and a proprietary, analytics-based underwriting model. We believe Ally Credit Card enhances our ability to grow and deepen both new and existing customer relationships. As of December 31, 2023, our credit card business had $2.0 billion of finance receivables and loans and approximately 1.2 million customers.

Corporate Treasury and ALM Activities

The net financing revenue and other interest income of our Automotive Finance, Mortgage Finance, and Corporate Finance operations include the results of an FTP process that insulates these operations from interest rate volatility by matching assets and liabilities with similar interest rate sensitivity. 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 is calculated based on a composite investment grade unsecured bond yield curve or based on advance rates published by the FHLB for any asset that is eligible to be pledged as collateral to the FHLB. While the baseline FTP components at Ally assume 100% debt funding, the framework also incorporates a credit on the allocated capital for each business line. For business lines not subject to an FTP funding allocation, the FTP methodology applies a capital charge to the amount of excess liquidity that the business line holds, relative to its regulatory capital. In addition, capital is managed with the goal of enhancing risk-adjusted returns on shareholders’ equity, while maintaining a strong capital position that is consistent with our risk profile. We allocate capital to business growth opportunities, within an established risk appetite, to support our customers and communities. We seek to pay a competitive dividend and may also distribute excess capital to shareholders through common share repurchases.

Deposits

We are focused on growing and retaining a stable deposit base and deepening relationships with our 3.0 million primary deposit customers by leveraging our compelling brand and strong value proposition. Ally Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers. We have grown our deposits with a strong brand that is based on a promise of being straightforward with our customers, and offering high-quality customer service and competitive interest rates. Ally Bank is the largest online only bank as measured by retail deposit balances. Our strong customer acquisition and retention rates reflect the strength of our brand and, together with our overall value proposition, continue to drive growth in retail deposits. At December 31, 2023, Ally Bank had $154.7 billion of total deposits—including $142.3 billion of retail deposits, which grew $4.6 billion, or 3%, during 2023. Over the past several years, the continued growth of our retail-deposit base has contributed to a more favorable mix of lower cost funding and we continue to focus on efficient deposit growth by continuing to expand the deposit value proposition beyond competitive deposit rates. Our segment results include cost of funds associated with these deposit-product offerings.

Our deposit products and services are designed to develop long-term customer relationships and capitalize on the shift in consumer preference for direct banking. Our deposits franchise is key to growing and building momentum across our suite of digital offerings at Ally Home, Ally Invest, and Ally Credit Card, consistent with our strategic objective to grow multi-product customers. These products and services appeal to a broad group of customers, many of whom appreciate a streamlined digital experience coupled with our strong value proposition. Ally Bank offers a full spectrum of retail deposit products, including savings accounts, money-market demand accounts, CDs, interest-bearing spending accounts, trust accounts, and IRAs. Our deposit services include Zelle® person-to-person payment services, eCheck remote deposit capture, and mobile banking. Our Smart Savings Tools further demonstrates the ability to deliver innovative digital tools on top of traditional financial products to add incremental value to customers, while also driving increased engagement and loyalty. Nearly 800,000 customers have adopted our Smart Savings Tools.

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 since 2010. We had 3.0 million deposit customers and 6.0 million retail bank accounts as of December 31, 2023, compared to 2.7 million and 5.0 million, respectively, as of December 31, 2022. Our customer base spans across diverse demographic segmentations and socioeconomic bands. Our direct bank business model resonates particularly well with the millennial generation, which consistently makes up the largest percentage of our new customers. According to a 2023 American Bankers Association survey, 86% 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 2 percentage points, from 9.5% in 2018 to 11.5% in 2023. We have received a positive response to innovative savings and other deposit products. In April 2023, Forbes again named Ally to its “World’s Best Banks” list followed by The Wall Street Journal’s

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Ally Financial Inc. • Form 10-K

BuySide recognition of Ally Bank as the “Best Online Bank of 2023.” In October 2023, MONEY® Magazine named Ally to its “Best Online Bank” list for the sixth consecutive year, as well as the eleventh time in the past thirteen years. In January 2023, Bankrate named Ally Bank the “Best Bank Overall.” Ally Bank’s competitive direct banking offerings include online and mobile banking features such as electronic bill pay, remote deposit, and electronic funds transfer nationwide, and no minimum balance requirements.

We intend to continue to grow and invest in our digital direct 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 connection to the brand. We are focused on growing, deepening, and further leveraging the customer relationships and brand loyalty that exist with Ally Bank as a catalyst for future loan and deposit growth, as well as revenue opportunities that arise from introducing Ally Bank deposit customers to our other suite of product offerings, including Ally Invest.

Funding and Liquidity

Our funding strategy targets a stable retail deposit base, supplemented by brokered deposits, public and private secured debt, and public unsecured debt. These diversified funding sources are managed across products, markets, and investors to enhance funding flexibility and stability, 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 continue to be the cornerstone of our long-term liquidity strategy. Our primary funding source is retail deposits, which we believe, at scale, are the most efficient and stable source of funding for us when compared to other funding sources. At December 31, 2023, deposit liabilities totaled $154.7 billion, which reflects an increase of $2.4 billion as compared to December 31, 2022. Deposits as a percentage of total liability-based funding was 88% at both December 31, 2023, and December 31, 2022. Approximately 92% of retail deposits at Ally Bank, excluding affiliate and intercompany deposits, were FDIC-insured as of December 31, 2023.

At both December 31, 2023, and December 31, 2022, 95% of Ally’s total assets were within Ally Bank. Longer-term unsecured debt is the primary funding source utilized at the parent company. At December 31, 2023, we had $1.5 billion and $2.5 billion of unsecured long-term debt principal maturing in 2024 and 2025, respectively. We have substantially reduced our reliance on market-based funding by continuing to focus on retail deposit funding.

The strategies outlined above have allowed us to build and maintain a conservative liquidity position. Total available liquidity at December 31, 2023, was $63.5 billion. Absolute levels of liquidity increased during 2023, primarily as a result of increased FRB Discount Window funding capacity. Refer to the section below titled Liquidity Management, Funding, and Regulatory Capital for a further discussion about liquidity risk management.

Credit Strategy

Our strategy and approach to extending credit, as well as our management of credit risk, are critical elements of our business. Credit performance is influenced by several factors including our risk appetite, our credit and underwriting processes, our monitoring and collection efforts, the financial condition of our borrowers, the performance of loan collateral, fiscal and monetary stimulus, and various macroeconomic considerations, including inflation. Our credit strategies are dynamic and are adjusted in response to asset performance, as well as changing macroeconomic conditions and outlook. Most of our businesses offer credit products and services, which drive overall business performance. Consistent with our risk appetite, our business lines operate under prudent credit standards that consider the borrower’s ability and willingness to repay loans. The failure to effectively manage credit risk can have a direct and significant impact on our earnings, capital position, and reputation. Refer to the Risk Management section of this MD&A for a further discussion of credit risk and performance of our consumer and commercial credit portfolios.

Within our consumer automotive loan portfolio, we serve a mix of consumers across the credit spectrum to achieve portfolio diversification and to optimize the risk and return of our consumer automotive portfolio. This is achieved through the utilization of robust credit decisioning processes coupled with granular pricing that is differentiated across our proprietary credit tiers. While we are a full-spectrum automotive finance lender, the significant majority of our consumer automotive loans are underwritten within the prime-lending segment. We define prime consumer automotive loans primarily as those loans with a FICO® Score at origination of 620 or greater. The carrying value of our held-for-investment, nonprime consumer automotive loans before allowance for loan losses was approximately 10.3% of our total consumer automotive loans at December 31, 2023.

Our Mortgage Finance operations focus on applicants with credit profiles and income streams to support repayments of the loan and operates under credit standards that consider and assess the value of the underlying real estate in accordance with prudent credit practices and regulatory requirements. Refer to the Mortgage Finance section of the MD&A that follows for credit quality information about purchases and originations of consumer mortgages held-for-investment. We generally rely on appraisals conducted by licensed appraisers in conformance with the expectations and requirements of Fannie Mae and federal regulators. When appropriate, we require credit enhancements such as private mortgage insurance. We price each mortgage loan that we originate based on several factors, including the customer’s FICO® Score, the LTV ratio, and the size of the loan. For bulk purchases, we only purchase loans from sellers with the experience to originate high-quality loans and the financial wherewithal to support their representations and warranties.

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Ally Financial Inc. • Form 10-K

Within Ally Lending, our digital provider that offers point-of-sale financing to consumers, we serve a mix of consumers to achieve portfolio diversification and to optimize the risk-adjusted returns of our personal lending portfolio. On December 31, 2023, we committed to sell our point-of-sale financing business, Ally Lending. For further information, refer to Note 2 to the Consolidated Financial Statements.

Additionally, Ally Credit Card, our scalable, digital-first credit card platform broadens our consumer finance product portfolio. Through Ally Credit Card, we have grown and deepened new and existing customer relationships, and have over 1.2 million active credit cardholders as of December 31, 2023. The majority of our credit card portfolio strategy is targeted towards nonprime borrowers while gradually expanding to a broader credit spectrum. As of December 31, 2023, the amortized cost of our finance receivables related to Ally Credit Card was $2.0 billion, as compared to $1.6 billion at December 31, 2022.

Within our commercial lending portfolios, our Corporate Finance operations offer senior-secured loans to private equity sponsor-owned U.S.-based middle-market companies and to facilities managed by well-established asset managers that mostly provide leveraged loans. The portfolio is composed of floating-rate leveraged asset-based and cash flow/enterprise value loans. Throughout 2023, we continued to prudently grow this portfolio with a disciplined and selective approach to credit quality, which included a greater focus on asset-based loans. This focus includes significant growth of our lender finance business, which provides senior secured revolving credit to facilities managed by asset managers, collateralized by a portfolio of loans. Within our commercial automotive business, we continue to offer a variety of dealer-centric lending products, including automotive dealer revolving lines of credit, term loans, including those to finance dealership land and buildings, acquisitions, and dealer fleet financing. These commercial automotive products are an important aspect of our dealer relationships and offer a secured lending arrangement with strong collateral protections in the event of dealer default. The performance of our commercial credit portfolios continues to remain strong. Commercial nonperforming finance receivables and loans decreased $43 million from December 31, 2022, to $119 million at December 31, 2023. Our total net charge-offs within our commercial lending portfolio increased to $124 million for the year ended December 31, 2023, compared to $55 million for the year ended December 31, 2022. Refer to the Risk Management section of the MD&A for further details.

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 record income taxes, net of valuation allowances, as well as wind-down, legal, and minimal operational costs. For all periods presented, the operating results for these operations have been removed from continuing operations. The MD&A has been adjusted to exclude discontinued operations unless otherwise noted.

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Ally Financial Inc. • Form 10-K

Primary Business Lines

Dealer Financial Services, which includes our Automotive Finance and Insurance operations, Mortgage Finance, and Corporate Finance are our primary business lines. The remaining activity is reported in Corporate and Other, which primarily consists of centralized treasury activities as well as Ally Invest, our digital brokerage and personal advice offering, Ally Lending, our point-of-sale financing business, Ally Credit Card, CRA loans and investments, and certain strategic investments. On December 31, 2023, we committed to sell our point-of-sale financing business, Ally Lending. For further information, refer to Note 2 to the Consolidated Financial Statements. The following table summarizes the operating results excluding discontinued operations of each business line. Operating results for each of the business lines are more fully described in the MD&A sections that follow.

n/m = not meaningful

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Ally Financial Inc. • Form 10-K

Consolidated Results of Operations

The following table summarizes our consolidated operating results for the periods shown. Refer to the reportable operating segment sections of the MD&A that follows for a more complete discussion of operating results by business line. For a discussion of our fiscal 2022 results compared to fiscal 2021, refer to Part II, Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K.

n/m = not meaningful

(a)The ratios were based on average assets and average total equity using an average daily balance methodology.

(b)The common dividend payout ratio was calculated using basic earnings per common share.

2023 Compared to 2022

We earned net income from continuing operations of $1.0 billion for the year ended December 31, 2023, compared to $1.7 billion for the year ended December 31, 2022. During the year ended December 31, 2023, results were favorably impacted by higher total financing revenue and other interest income, a decrease in income tax expense from continuing operations, and an increase in other gain on investments, net. These items were more than offset by higher interest expense, provision for credit losses, and noninterest expense for the year ended December 31, 2023.

Net financing revenue and other interest income decreased $649 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. Consumer automotive revenue increased as higher portfolio yields resulting from pricing actions taken in response to rising benchmark interest rates contributed to the increase in revenue. The increase was also impacted by higher average consumer assets resulting from growth in the used-vehicle portfolio, primarily through franchised dealers and national retailers. Commercial automotive

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Ally Financial Inc. • Form 10-K

revenue increased due to higher yields from higher benchmark interest rates, as our commercial automotive loans are generally variable-rate. The increase was also impacted by higher asset balances resulting from improvements in new vehicle supply. Additionally, revenue increased due to the impacts of a higher interest rate environment on the investment securities portfolio and hedging activities, and higher interest associated with cash and cash equivalents and growth within unsecured lending. The increase was more than offset by higher interest expense. We experienced higher interest expense for the year ended December 31, 2023, as compared to 2022, in response to higher benchmark interest rates, which increased our cost of funds associated with our deposit liabilities.

Insurance premiums and service revenue earned was $1.3 billion for the year ended December 31, 2023, compared to $1.2 billion for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily driven by higher P&C earned premium from higher dealer inventory levels, growth in other dealer-related protection products, and higher other premium and service revenue written from non-automotive assumed reinsurance business.

Other gain on investments, net, was $144 million for the year ended December 31, 2023, compared to other loss on investments, net of $120 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023, compared to 2022, was primarily attributable to the performance of equity securities, consistent with broader stock market performance. The increase was partially offset by realized gains from the sale of available-for-sale securities and equity securities during the year ended December 31, 2022, that did not reoccur.

Other income, net of losses increased $87 million for the year ended December 31, 2023, compared to 2022. The increase was primarily driven by net downward adjustments of $9 million related to equity securities without a readily determinable fair value for the year ended December 31, 2023, compared to net downward adjustments (including impairment) of $137 million during the year ended December 31, 2022. Additionally, the increase for the year ended December 31, 2023, was driven by increased late charges and other administrative fees, as delinquencies have increased amid deterioration in macroeconomic conditions, driven by persistent inflation. During the year ended December 31, 2023, we observed a slowing rate of increase in delinquency trends within our consumer automotive loan portfolio, as compared to 2022, as we continue to make adjustments to our underwriting strategies. The increase was partially offset by a decrease in income from equity-method investments.

The provision for credit losses increased $569 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase in provision for credit losses for the year ended December 31, 2023, was primarily driven by higher net charge-offs across our consumer portfolios. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Noninterest expense was $5.2 billion for the year ended December 31, 2023, compared to $4.7 billion for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was driven by increased expenses to support the growth of our consumer product suite and expand our digital capabilities and portfolio of products, and we incurred higher collection and repossession costs. Additionally, insurance losses and loss adjustment expenses increased for the year ended December 31, 2023, as compared to 2022, primarily due to increased losses from our vehicle inventory insurance program attributable to higher weather frequency and severity, growing dealer inventory levels, and higher insured values for non-weather losses. The increase was also driven by a goodwill impairment charge related to the commitment to sell Ally Lending during the year ended December 31, 2023. Refer to Note 2 to the Consolidated Financial Statements for further discussion.

We recognized total income tax expense from continuing operations of $61 million for the year ended December 31, 2023, compared to income tax expense of $627 million for the year ended December 31, 2022. The decrease in income tax expense for the year ended December 31, 2023, compared to 2022, was primarily due to the tax effects of a decrease in pretax earnings, adjustments to the valuation allowance on foreign tax credit carryforwards, and an increase in qualified clean vehicle tax credits for purchased plug-in electric vehicles or fuel cell vehicles. Refer to Note 22 to the Consolidated Financial Statements for further discussion.

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Ally Financial Inc. • Form 10-K

Dealer Financial Services

Results for Dealer Financial Services are presented by reportable operating 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 operating segments.

n/m = not meaningful

(a)Includes net remarketing gains of $211 million, $170 million, and $344 million for the years ended December 31, 2023, 2022, and 2021, respectively.

2023 Compared to 2022

Our Automotive Finance operations earned income from continuing operations before income tax expense of $1.6 billion for the year ended December 31, 2023, compared to $2.3 billion for the year ended December 31, 2022. For the year ended December 31, 2023, the decrease was primarily due to higher interest expense and higher provision for credit losses, partially offset by higher financing revenue and other interest income.

Consumer automotive loan financing revenue and other interest income increased $1.1 billion for the year ended December 31, 2023, compared to 2022. Higher portfolio yields resulting from pricing actions taken in response to rising benchmark interest rates contributed to the increase in revenue. The increase was also impacted by higher average consumer assets resulting from growth in the used-vehicle portfolio, primarily through franchised dealers and national retailers.

Commercial loan financing revenue and other interest income increased $680 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily due to higher yields from higher benchmark interest rates, as our commercial automotive loans are generally variable-rate. The increase was also impacted by higher asset balances resulting from improvements in new vehicle supply.

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Ally Financial Inc. • Form 10-K

Interest expense was $3.5 billion for the year ended December 31, 2023, compared to $1.9 billion for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily driven by a higher interest rate environment, resulting in higher funding costs.

Total net operating lease revenue increased $8 million for the year ended December 31, 2023, compared to 2022. The increase in net operating lease revenue was driven by higher remarketing gains on off-lease vehicles, primarily due to normalizing volume trends in the contractually priced buyout channels. Refer to the Operating Lease Residual Risk Management section of this MD&A for further discussion.

Total other revenue increased $15 million for the year ended December 31, 2023, compared to 2022. The increase was primarily due to an increase in servicing fees, late charges, and remarketing fee income. The increase in servicing fees was due to the growth in financial assets transferred to a nonconsolidated SPE for which we retain the ongoing right to service the assets. The increase in late charges was due to higher delinquencies amid deterioration in macroeconomic conditions, driven by persistent inflation. During the year ended December 31, 2023, we observed a slowing rate of increase in delinquency trends within our consumer automotive loan portfolio, as compared to 2022, as we continue to make adjustments to our underwriting strategies. The increase in remarketing fee income was primarily due to an increase in remarketing transaction volume through our SmartAuction platform. Refer to Note 11 to the Consolidated Financial Statements for additional information regarding assets sold to nonconsolidated SPEs.

The provision for credit losses increased $582 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase in provision for credit losses was primarily driven by higher net charge-offs during the year ended December 31, 2023. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Total noninterest expense increased $206 million for the year ended December 31, 2023, compared to 2022. The increase was primarily due to expenses to support the growth of our consumer product suite and expand our digital capabilities and portfolio of products. Additionally, we incurred higher collection and repossession costs during the year ended December 31, 2023, as compared to 2022.

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

(a)Average balances are calculated using an average daily balance 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.

(c)Excludes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other. Including the impact of hedging activities, the yield was 8.79%, 7.19%, and 6.65% for the years ended December 31, 2023, 2022, and 2021, respectively.

(d)Excludes the effects of derivative financial instruments designated as hedges, which is included within Corporate and Other. Including the impact of hedging activities, the yield was 7.70%, 4.49%, and 3.17% for the years ended December 31, 2023, 2022, and 2021, respectively.

(e)Consists primarily of automotive dealer term loans, including those to finance dealership land and buildings, and dealer fleet financing.

(f)Yield includes net gains on the sale of off-lease vehicles of $211 million, $170 million, and $344 million for the years ended December 31, 2023, 2022, and 2021, respectively. Excluding these gains on sale, the yield was 4.81% for both the years ended December 31, 2023, and 2022, and 6.05% for the year ended December 31, 2021.

During the year ended December 31, 2023, our portfolio yield for consumer automotive loans, excluding the impact of hedging activities, increased 102 basis points, as compared to 2022. The increase for the year ended December 31, 2023, was primarily driven by higher portfolio yields resulting from pricing actions. We continued to opportunistically adjust pricing in response to rising benchmark interest rates during 2023. Our portfolio yield for consumer automotive loans, including the effects of derivative financial instruments designated as hedges, was 80 basis points higher than our portfolio yield for consumer automotive loans excluding the effects of derivative financial instruments designated as hedges for the year ended December 31, 2023. This is attributable to the execution of hedging strategies that are used to mitigate interest rate risks. The effects of derivative financial instruments designated as hedges are included within Corporate and Other. Refer to Note 21 to the Consolidated Financial Statements for further discussion.

Our portfolio yield for investment in operating leases, net, including net gains on the sale of off-lease vehicles, was 6.93% for the year ended December 31, 2023, compared to 6.41% for the year ended December 31, 2022. The increase was due to higher remarketing gains on off-lease vehicles. Refer to the section titled Operating Lease Residual Risk Management within this MD&A for additional information.

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Ally Financial Inc. • Form 10-K

Automotive Financing Volume

Our Automotive Finance operations provide automotive financing services to consumers and automotive dealers and retailers. 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 and revolving loans and automotive fleet financing.

Acquisition and Underwriting

Our consumer 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 LTV, 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 help determine our primary indication of credit quality and pricing, and are also communicated to the dealer that submitted the application. This process is built on long established credit risk fundamentals to determine both the applicant’s ability and willingness to repay. While advances in excess of 100% of the vehicle collateral value at loan origination—notwithstanding cash down and vehicle trade in value—are 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.

Our underwriting process uses a combination of automated strategies and manual evaluation by an experienced team of dedicated underwriters. Continued advancements in our data-driven risk assessment process have allowed us to methodically increase our use of automated credit decisioning in recent years. This increase in automated decisioning has enhanced the buying experience for our dealer and consumer customers through improved response times, and more consistent credit decisions. Underwriting is also governed by our credit policies, which set forth guidelines such as acceptable transaction parameters and verification requirements. For higher-risk approved transactions, these guidelines require verification of details such as applicant income and employment through documentation provided by the applicant or other data sources. We continue to monitor loss performance across the risk spectrum, which enables us to implement risk mitigation strategies, including pricing increments and curtailment actions on underperforming microsegments.

Underwriters have a limited ability to approve exceptions to the guidelines in our credit policies. For example, an exception may be approved to allow a term or a ratio of payment-to-income, debt-to-income, or LTV greater than that in the guidelines. Exceptions must be approved by underwriters with appropriate approval authority and generally are based on compensating factors. We monitor exceptions with the goal of limiting them 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

New- and used-vehicle consumer financing through dealerships takes one of two forms: retail installment sales contracts (retail contracts) and operating lease contracts. We purchase retail contracts for new and used vehicles and operating lease contracts from dealers after those contracts are executed by the dealers and the consumers. Our consumer automotive financing operations generate revenue primarily through finance charges on retail contracts and rental payments on operating lease contracts. In connection with operating lease contracts, we recognize depreciation expense on the vehicle over the operating lease contract period and 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 rate of finance charge agreed by the dealer and customer, the negotiated purchase price of the vehicle, 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. Consistent with industry practice, when we purchase the retail contract, we pay the dealer at a rate discounted below the rate agreed by the dealer and the consumer (generally described in the industry as the “buy rate”). Our agreements with dealers limit the amount of the discount that we will accept. Although we do not own the vehicles that we finance through retail contracts, our agreements require that we hold a perfected security interest in those vehicles.

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. Our underwriting capabilities allow us to manage our risk tolerance levels to quickly react to major changes in the economy. Over the past several years, we have continued to focus on optimizing pricing relative to market interest rates as well as portfolio diversification and the used-vehicle segment, primarily through franchised dealers and automotive retailers, which has contributed to higher yields on our consumer automotive loan portfolio. Commensurate with this shift in origination mix, we continue to maintain disciplined underwriting within our new- and used- consumer automotive loan originations.

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Ally Financial Inc. • Form 10-K

With respect to consumer leasing, we purchase operating lease contracts and the associated vehicles from dealerships after those contracts are executed by the dealers and the consumers. The amount we pay a dealer for an operating lease contract 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 an operating 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 operating 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 leased 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 then-current market conditions and adjust depreciation expense, if appropriate, over the remaining life of the contract. Upon termination of the lease, lessees generally have the ability to exercise a purchase option at the stated contractual amount. If the lessee declines to exercise the purchase option, the dealer then has the ability to buy out the vehicle. If neither the lessee or dealer completes the buyout, the vehicle is returned to us and we remarket the vehicle. 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.

Our standard consumer operating lease contract, SmartLease, requires a monthly payment by the consumer. We also offer an alternative leasing plan, SmartLease Plus, which requires one up-front payment of all operating lease amounts at the time the consumer takes possession of the vehicle.

Our standard consumer lease contracts 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 operating lease portfolio are correlated with lease termination volume. Operating lease accounts over 30 days past due represented 1.4% and 1.1% of the portfolio at December 31, 2023, and 2022, respectively.

With respect to all financed vehicles, whether subject to a retail contract or an operating lease contract, we require that property damage insurance be obtained by the consumer. In addition, for operating lease contracts, we require that bodily injury, collision, and comprehensive insurance be obtained by the consumer.

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Ally Financial Inc. • Form 10-K

The following table presents retail loan originations and purchases by credit tier and product type.

(a)Represents Ally’s internal credit score, incorporating numerous borrower and structure attributes including: severity and aging of delinquency; number of credit inquiries; LTV ratio; term; payment-to-income ratio; and debt-to-income ratio. We periodically update our underwriting scorecard, which can have an impact on our credit tier scoring.

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

Retail loan originations with a term of 76 months or more represented 23% of total retail loan originations for the year ended December 31, 2023, compared to 22% for the year ended December 31, 2022. Substantially all the loans originated with a term of 76 months or more during both the years ended December 31, 2023, and 2022, were considered to be prime and in credit tiers S, A, or B. Our underwriting processes are designed to consider various deal structure variables—such as payment-to-income, LTV, debt-to-income, and FICO® score—that compensate for longer loan terms and mitigate underwriting risk.

During the year ended December 31, 2023, approximately 83% of our used retail loan originations were for vehicles with a model year of 2017 or newer. According to the Bureau of Transportation Statistics, the average age of light vehicles in operation in the United States during 2022 was approximately 12 years. Substantially all used retail loan originations with a term of 76 months or more during the year ended December 31, 2023, were for vehicles with a model year of 2017 or newer.

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

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

(a)Includes CSG originations of $5.0 billion, $5.7 billion, and $4.7 billion for the years ended December 31, 2023, 2022, and 2021, respectively.

Total consumer automotive loan and operating lease originations decreased $6.4 billion for the year ended December 31, 2023, compared to 2022. The decrease was primarily driven by our dynamic underwriting strategies, including strategic pricing and curtailment actions to optimize our risk appetite and returns.

We have included origination metrics by loan term and FICO® Score within this MD&A. In addition, we employ our own risk evaluation, including proprietary risk models, in evaluating credit risk, as described in the section above titled Automotive Financing Volume—Acquisition and Underwriting.

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The following table presents the percentage of retail loan and operating lease originations and purchases, in dollars, by FICO® Score and product type. We define prime consumer automotive loans primarily as those loans with a FICO® Score at origination of 620 or greater.

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

Originations with a FICO® Score of less than 620 (considered nonprime) represented 9% of total consumer loan and operating lease originations for each of the years ended December 31, 2023, 2022, and 2021. Consumer loans and operating leases with FICO® Scores of less than 540 represented 2% of total originations for the year ended December 31, 2023, and 1% of total originations for both the years ended December 31, 2022, and 2021. Nonprime applications are subject to more stringent underwriting criteria (for example, minimum payment-to-income ratio, maximum debt-to-income ratio, and maximum amount financed), and our nonprime loan portfolio generally does not include any loans with a term of 76 months or more. The carrying value of our held-for-investment, nonprime consumer automotive loans before allowance for loan losses was $8.7 billion and $8.8 billion at December 31, 2023, and December 31, 2022, respectively, or approximately 10.3% and 10.6% of our total consumer automotive loans at December 31, 2023, and December 31, 2022. For discussion of our credit-risk-management practices and performance, refer to the section titled Risk Management.

During the first quarter of 2024, we amended our relationship with Carvana, a leading e-commerce platform for buying and selling used vehicles. Specifically, we maintained our committed facility at a maximum of $4.0 billion to support our continued efforts to optimize risk-adjusted returns. This commitment is effective for 364 days. As part of the agreement, we continue to purchase finance receivables on a periodic basis within prescribed eligibility requirements and risk appetite, consistent with purchase practices in prior years. All the finance receivables purchased through this channel are used vehicles, and are included in non-OEM-franchised dealers and automotive retailers in our consumer origination metrics. While different vintages exhibit varying performance, collectively to date, finance receivables purchased from Carvana have exhibited consistent delinquency and loss performance compared to loans with similar credit characteristics acquired through our indirect dealer channel. Consumer finance receivables and loans sourced from Carvana represented 8.2% of our total consumer automotive finance receivables and loans as of December 31, 2023. During the year ended December 31, 2023, loan purchases from Carvana were 9% of our total consumer automotive financing originations.

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Manufacturer Marketing Incentives

Automotive manufacturers may elect to sponsor incentive programs on retail contracts and operating leases by subsidizing finance rates below market rates. These marketing incentives are also referred to as rate support or subvention. When an automotive manufacturer subsidizes the finance rate, we are compensated at contract inception for the present value of the difference between the manufacturer-supported customer rate and our standard rate. For a retail contract, we defer and recognize this amount as a yield adjustment over the life of the contract. For an operating lease contract, this payment reduces our cost basis in the underlying operating lease asset.

Automotive manufacturers may also elect to sponsor incentives, referred to as residual support, on operating leases. When an automotive manufacturer provides residual support, we receive payment at contract inception that increases the contractual operating lease residual value resulting in a lower operating lease payment from the customer. The payment received from the automotive manufacturer reduces our cost basis in the underlying operating lease asset. Other operating lease incentive programs sponsored by automotive manufacturers may be made at contract inception indirectly through dealers, which also reduces our cost basis in the underlying operating lease asset.

Under what the automotive finance industry refers to as “pull-ahead programs,” consumers may be encouraged by the manufacturer to terminate operating leases early in conjunction with the acquisition of a new vehicle. As part of these programs, we may 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. This compensation may be partially offset to the extent that our remarketing sales proceeds are higher than otherwise would be realized if the vehicle had been remarketed upon contract maturity.

Servicing

We have historically serviced all retail contracts and operating leases we originated, including a small amount of retail contracts originated as held-for-sale. 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. As of December 31, 2023, we serviced 91% of our consumer automotive loan portfolio.

Servicing activities consist largely of collecting and processing customer payments, responding to customer concerns and inquiries, processing customer requests (including those for payoff quotes, total-loss handling, and payment modifications), maintaining a perfected security interest in the financed vehicle, engaging in collections activity, 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 state laws.

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 Ally Auto Online Services. 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 operating lease agreement by sending reminder notices or contacting customers via various channels when an account becomes 3 to 7 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 collections 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. 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 extension period, finance charges continue to accrue. If the customer’s financial difficulty is not temporary but we believe the customer is willing and able to repay their loan at a lower payment amount, we may offer to modify the remaining obligation through a rewrite, extending the term and lowering the interest rate. In the event of a rewrite, the outstanding balance generally remains unchanged. The use of extensions and other modifications help us mitigate financial loss. Extensions may assist in cases where we believe the customer will recover from short-term financial difficulty and resume regularly scheduled payments. Modifications may also be utilized in cases where we believe customers can fulfill the obligation with lower payments over a longer period. Before offering an extension or modification, we evaluate and take into account the capacity of the customer to meet the revised payment terms. We generally 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 loan modifications for reporting purposes. 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 both December 31, 2023, and December 31, 2022, 14.8% of the total amount outstanding in the servicing portfolio had been granted an extension or was rewritten.

Subject to legal considerations, we generally begin repossession activity once an account is at least 90 days past due. Repossession may occur earlier if we determine the customer is unwilling to pay, the vehicle is in danger of being damaged or hidden, or the customer voluntarily surrenders the vehicle. We assign accounts to approved third-party repossession vendors, who handle the repossession activity on our behalf. Any disruptions in the repossession process could impact our ability to timely or successfully repossess the vehicle. Generally, after repossession, the customer is given a period of time to redeem the vehicle or reinstate the contract by paying off the account or bringing the account current, respectively. If the vehicle is not redeemed or the contract is not reinstated, the vehicle is sold at auction. Generally, the proceeds do not cover the unpaid balance, including unpaid earned finance charges and allowable expenses, and 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.

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Our total consumer automotive loan and lease serviced portfolio was $88.5 billion and $87.6 billion at December 31, 2023, and 2022, respectively, compared to our on-balance sheet consumer automotive loan and lease serviced portfolio of $86.0 billion and $87.4 billion.

Remarketing and Sales of Leased Vehicles

When we acquire an operating 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. Conversely, we may recognize a remarketing gain when the proceeds from a returned vehicle are greater than 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 lessee — The lessee has the first opportunity to purchase the off-lease vehicle at the end of the lease term for the price stated in the lease agreement, which equals the contract residual value determined at origination.

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

•Internet auctions — Once the lessee and the dealer decline to purchase the off-lease vehicle, we offer it to dealers and other third parties through our proprietary internet site (SmartAuction). Through SmartAuction, we seek to maximize the net sales proceeds from an off-lease vehicle by reducing the time between vehicle return and ultimate disposition, reducing holding costs, and broadening the number of prospective buyers. We use SmartAuction for our own vehicles and make it available 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 assist in minimizing the risk to dealers of arbitration claims for eligible vehicles. In 2023, approximately 505,000 vehicles were sold through SmartAuction, as compared to approximately 336,000 in 2022.

•Physical auctions — We dispose of an off-lease vehicle not purchased at termination by the lessee or dealer or sold on SmartAuction 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 operating 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 (for example, Manheim, NADA). This analysis includes vehicles sold on our 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 providing wholesale floorplan financing for new- and used-vehicle inventories at dealerships. Wholesale floorplan 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 floorplan financing is generally extended in the form of lines of credit to individual dealers. These lines of credit are secured by the vehicles financed and all other vehicle inventory, which provide strong collateral protection in the event of dealership default. Additional collateral (for example, blanket lien over all dealership assets) or other credit enhancements (for example, personal guarantees from dealership owners) are generally obtained to further mitigate credit risk. Furthermore, in some cases, we may benefit from situations where an automotive manufacturer repurchases vehicles. These repurchases may serve as an additional layer of protection in the event of repossession of dealership new-vehicle inventory or dealership franchise termination. The amount we advance to dealers for a new vehicle is equal to 100% of the manufacturer’s wholesale invoice price, subject to payment curtailment schedules. The amount we advance to dealers for a used vehicle is typically 90–100% of the dealer’s cost of acquiring it. Interest on wholesale floorplan financing is generally payable monthly. The majority of wholesale floorplan financing is structured to yield interest at a floating rate indexed to 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, under our Ally Dealer Rewards Program, dealers benefit in certain circumstances from wholesale-floorplan-financing incentives, which we pay and account for as a reduction to interest income in the period they are earned.

Under our wholesale-floorplan-financing agreement, a dealership is generally required to pay the principal amount financed for a vehicle within a specified number of days following the dealership’s sale or lease of the vehicle. The agreement also affords us the right to demand payment of all amounts owed under the wholesale credit line at any time. We, however, generally make this demand only if we terminate the credit line, the dealer defaults, or a risk-based reason exists to do so.

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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.

Average commercial wholesale financing receivables outstanding increased $2.8 billion during the year ended December 31, 2023, as compared to 2022. The increase for the year ended December 31, 2023, as compared to 2022, was primarily due to increased industry-wide new vehicle inventory levels. This was partially offset by reduced used vehicle inventory levels across the automotive industry.

As of December 31, 2023, Carvana's commercial line of credits totaled $1.5 billion, with a scheduled maturity in the third quarter of 2025. The line of credit represents a commitment to fund Carvana’s wholesale floorplan financing of used vehicles and is consistent in form and structure with our other wholesale floorplan financing arrangements. This includes the line of credit being fully collateralized to mitigate counterparty credit risk in the event of a default. On August 31, 2023, Carvana announced the following final results of its previously announced debt exchange offers: reduction in total debt by over $1.3 billion, extension of maturities, and lowering of near-term cash interest expense by more than $455 million each year for the next two years. Prior to that announcement, Carvana had asked us to consent to Carvana offering a second-priority lien on much of our collateral in connection with the debt exchange offers described in the August 31, 2023, announcement and other debt exchange offers contemplated in prior Carvana announcements. On September 1, 2023, we consented to this request in the context of our long-standing business relationship with Carvana and on terms that maintain our collateral position. At December 31, 2023, Carvana’s gross wholesale floorplan assets outstanding balance was $113 million.

Other Commercial Automotive Financing

We also provide other forms of commercial financing for the automotive industry including automotive dealer term and revolving loans and automotive fleet financing. Automotive dealer term and revolving 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 or other dealership assets and are typically personally guaranteed by the individual owners of the dealership. Additionally, these loans generally include cross-collateral and cross-default provisions. 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. The average balances of other commercial automotive loans increased $917 million for the year ended December 31, 2023, compared to 2022, to an average of $6.0 billion for the year ended December 31, 2023.

Servicing and Monitoring

We service all of the wholesale credit lines in our portfolio and the associated wholesale automotive finance receivables. 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.

We manage risk related to wholesale floorplan financing by assessing dealership borrowers using a proprietary model based on various factors, including their capital sufficiency, operating performance, and credit and payment history. This model assigns dealership borrowers a risk rating that 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.

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.

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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.

n/m = not meaningful

(a)Includes interest expense of $32 million, $37 million, and $58 million for the years ended December 31, 2023, 2022, and 2021, respectively.

(b)Includes net unrealized gains on equity securities of $110 million for the year ended December 31, 2023, and net unrealized losses on equity securities of $210 million and $10 million for the years ended December 31, 2022, and 2021, respectively.

(c)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 revenue earned and other income (excluding interest, dividends, and other investment activity).

2023 Compared to 2022

Our Insurance operations generated income from continuing operations before income tax expense of $213 million for the year ended December 31, 2023, compared to a loss of $38 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily driven by higher net investment gains and increases in insurance premiums and service revenue earned, which were partially offset by increases in insurance losses and loss adjustment expenses.

Insurance premiums and service revenue earned was $1.3 billion for the year ended December 31, 2023, compared to $1.2 billion for the same period in 2022. The increase for the year ended December 31, 2023, was primarily driven by higher P&C earned premium from higher dealer inventory levels, growth in other dealer-related protection products, and higher other premium and service revenue written from non-automotive assumed reinsurance business.

Other gain on investments, net was $144 million for the year ended December 31, 2023, compared to other loss on investments, net of $143 million for the same period in 2022. The increase for the year ended December 31, 2023, was primarily attributable to the performance of equity securities, consistent with broader stock market performance.

Insurance losses and loss adjustment expenses totaled $422 million for the year ended December 31, 2023, compared to $280 million for the same period in 2022. Loss and loss adjustment expenses for the year ended December 31, 2023, increased primarily due to increased losses from our vehicle inventory insurance program attributable to higher weather frequency and severity, growing dealer inventory levels, and higher insured values for non-weather losses. During the year ended December 31, 2023, weather-related loss and loss adjustment expenses from our vehicle inventory insurance program was $90 million, compared to $34 million during the same period in 2022. We utilized our excess of loss reinsurance and ceded weather-related losses on our vehicle inventory insurance program for the first and third quarters of 2023 as losses exceeded the retention limits of $14 million and $21 million, respectively. In April 2023, we renewed our annual

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excess of loss reinsurance agreement and continue to utilize this coverage for our vehicle inventory insurance to manage our risk of weather-related losses under which retention limits vary for each quarter. Additionally, higher GAP losses for the year ended December 31, 2023, were primarily driven by higher loss frequency and severity following vehicle value normalization. Losses also increased commensurate with portfolio growth from other dealer-related protection products in our P&C business and growth in non-automotive assumed reinsurance business.

Our combined ratio was 103.7% for the year ended December 31, 2023, compared to 98.6% for the same period in 2022. The increase was primarily driven by an increase in insurance losses and loss adjustment expense during the year ended December 31, 2023, partially offset by higher earned premiums. In particular, the increase was primarily driven by increased weather frequency and severity in our P&C business, higher GAP losses that were primarily driven by higher loss frequency and severity following used vehicle normalization and higher loss severity from VSCs as a result of higher vehicle part and labor costs.

Premium and Service Revenue Written

The following table summarizes premium and service revenue written by product, net of premiums ceded to reinsurers, and premiums and service revenue assumed from third-parties. VSC and GAP revenue are earned over the life of the service contract on a basis proportionate to the anticipated loss pattern. Refer to Note 3 to the Consolidated Financial Statements for further discussion of this revenue stream.

(a)Other financial and insurance products include VMCs, ClearGuard, and other ancillary products.

(b)P&C insurance includes vehicle inventory insurance and dealer ancillary products including property and liability coverage underwritten by a third-party carrier earned on a straight-line basis.

(c)Primarily includes non-automotive assumed reinsurance and revenue associated with performing services as an underwriting carrier.

Insurance premiums and service revenue written was $1.3 billion for the year ended December 31, 2023, compared to $1.1 billion for the same period in 2022. The increase was primarily due to higher written premiums from our P&C business from rising dealer inventory levels and growth in other dealer property and liability products. The increase was also impacted by higher F&I premiums for other ancillary products in the U.S. and higher volume in Canada, partially offset by a continued shift in VSC product mix toward dealer reinsurance structures, where we earn a fee to administer the contract and cede premium and losses from the contract to the dealer’s reinsurance company. Additionally, the increase was also driven by growth in other premium and service revenue written from non-automotive assumed reinsurance business.

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.

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

In addition to these cash and investment securities, the Insurance segment has interest-bearing intercompany arrangements with Corporate and Other, callable on demand. The intercompany loan balance due to Insurance was $619 million and $417 million at December 31, 2023, and December 31, 2022, respectively, and related interest income of $10 million and $9 million was recognized for the years ended December 31, 2023, and 2022.

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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.

n/m = not meaningful

2023 Compared to 2022

Our Mortgage Finance operations earned income from continuing operations before income tax expense of $92 million for the year ended December 31, 2023, compared to $55 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily driven by lower noninterest expense, partially offset by lower net financing revenue and other interest income and gain on mortgage loans, net.

Net financing revenue and other interest income was $211 million for the year ended December 31, 2023, compared to $221 million for the year ended December 31, 2022. The decrease in net financing revenue and other interest income for the year ended December 31, 2023, was primarily driven by a higher interest rate environment, which resulted in a decrease in asset balances due to lower origination volume and an increase in the cost of funds. This was partially offset by lower prepayment activity, which resulted in lower premium amortization. Premium amortization was $3 million for the year ended December 31, 2023, compared to $18 million for the year ended December 31, 2022. During the year ended December 31, 2023, we purchased $21 million of mortgage loans that were originated by third parties, compared to $2.8 billion during the year ended December 31, 2022. We originated $143 million of mortgage loans held-for-investment during the year ended December 31, 2023, compared to $1.1 billion during the year ended December 31, 2022.

Gain on sale of mortgage loans, net, was $16 million for the year ended December 31, 2023, compared to $26 million for the year ended December 31, 2022. The decrease for the year ended December 31, 2023, was attributable to lower volume on direct-to-consumer mortgage originations and the subsequent sale of these loans to BMC. We originated $812 million of loans held-for-sale during the year ended December 31, 2023, compared to $2.1 billion during the year ended December 31, 2022.

The provision for credit losses decreased $6 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The decrease in provision for credit losses for the year ended December 31, 2023, was primarily driven by a decrease in the portfolio size. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Total noninterest expense was $138 million for the year ended December 31, 2023, compared to $190 million for the year ended December 31, 2022. The decrease for the year ended December 31, 2023, was primarily driven by lower operating expenses due to lower origination volumes. These costs are generally scalable with our origination volume as a result of our strategic partnership with BMC.

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The following table presents the total UPB of purchases and originations of consumer mortgages held-for-investment, by FICO® Score at the time of acquisition.

During the year ended December 31, 2023, we purchased and originated fewer consumer mortgage held-for-investment loans, as compared to the same period in 2022. The decrease was primarily driven by the elevated interest rate environment. Our origination levels were also impacted as we look to strategically deploy capital efficiently across our multiple business lines. When interest rates rise, the likelihood of refinancing decreases and origination volumes tend to decrease.

The following table presents the net UPB, net UPB as a percentage of total, WAC, premium net of discounts, LTV, and FICO® Scores for the products in our Mortgage Finance held-for-investment loan portfolio.

(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.

(c)Updated to reflect changes in credit score since loan origination.

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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.

n/m = not meaningful

2023 Compared to 2022

Our Corporate Finance operations earned income from continuing operations before income tax expense of $307 million for the year ended December 31, 2023, compared to $282 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily due to higher net financing revenue and other interest income, partially offset by lower total other revenue and higher noninterest expense, as compared to the year ended December 31, 2022.

Net financing revenue and other interest income was $397 million for the year ended December 31, 2023, compared to $334 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023, was primarily due to higher average assets from continued growth in the portfolio, as well as higher interest income resulting from higher rates as all loans in the portfolio are variable rate. This was partially offset by an increase in interest expense as benchmark interest rates continued to rise.

Other revenue decreased $18 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The decrease was primarily due to lower net investment gains, driven by a gain from the sale of a previously restructured exposure recognized during the year ended December 31, 2022. The decrease was partially offset by higher fee income for the year ended December 31, 2023, as compared to the same period in 2022.

The provision for credit losses increased $9 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was driven by reserve reductions in the year ended December 31, 2022, related to reserves established at the onset of the COVID-19 pandemic, partially offset by lower specific reserve activity during the year ended December 31, 2023, and lower portfolio loan growth as compared to the same period in 2022. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Total noninterest expense increased $11 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily due to higher direct and allocated expenses related to the growth of the business.

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Credit Portfolio

The following table presents loans held-for-sale, the amortized cost of finance receivables and loans outstanding, unfunded commitments to lend, and total serviced loans of our Corporate Finance operations. As of December 31, 2023, 65% of our loans and 62% of our lending commitments were asset based, with 99.9% in a first-lien position. Additionally, as of December 31, 2023, total criticized exposures were 10.6% and 14.2% of total Corporate Finance finance receivables and loans at December 31, 2023, and December 31, 2022, respectively.

(a)Includes $9.6 billion and $9.0 billion of commercial and industrial loans at December 31, 2023, and December 31, 2022, respectively, and $1.3 billion and $1.1 billion of commercial real estate loans at December 31, 2023, and December 31, 2022. Our commercial real estate loans are currently focused on lending to skilled nursing facilities, senior housing, and medical office buildings. There are no exposures related to commercial office buildings.

(b)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 in the event of a draw by the beneficiary thereunder. As many of these commitments are subject to borrowing base agreements and other restrictive covenants or may expire without being fully drawn, the stated amounts of these unfunded commitments 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 amortized cost.

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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 as well as other strategic investments through Ally Ventures, the management of our legacy mortgage portfolio, which primarily consists of loans originated prior to January 1, 2009, the activity related to Ally Invest, Ally Lending, Ally Credit Card, CRA loans and investments, and reclassifications and eliminations between the reportable operating segments. Additionally, Corporate and Other includes costs that are not allocated to our reportable operating segments as part of our COH methodology, which involves management judgment. Refer to Note 26 to the Consolidated Financial Statements for more information.

n/m = not meaningful

(a)Includes impacts associated with hedging activities within our automotive loan portfolio, consumer other lending activity, and financing revenue from our legacy mortgage portfolio.

(b)Includes impacts associated with hedging activities of our available-for-sale securities.

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

(d)Includes the residual impacts of our FTP methodology and impacts of hedging activities of certain debt obligations.

(e)Includes reductions of $1.4 billion, $1.3 billion, and $1.1 billion for the years ended December 31, 2023, 2022, and 2021, respectively, related to the allocation of COH expenses to other segments. The receiving segments record their allocation of COH expense within other operating expense.

(f)Includes a $149 million impairment of goodwill related to the transfer of our Ally Lending business to held-for-sale for the year ended December 31, 2023. Refer to Note 2 to the Consolidated Financial Statements for additional information.

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The following table presents the scheduled remaining amortization of the original issue discount at December 31, 2023.

(a)The maximum annual scheduled amortization for any individual year is $143 million in 2030.

(b)The amortization is included as interest on long-term debt in the Consolidated Statement of Income.

2023 Compared to 2022

Corporate and Other incurred a loss from continuing operations before income tax expense of $1.1 billion for the year ended December 31, 2023, compared to a loss of $207 million for the year ended December 31, 2022. The increase in loss for the year ended December 31, 2023, was primarily driven by an increase in interest expense due to a higher interest rate environment, partially offset by an increase in total financing revenue and other interest income and total other revenue.

Total financing revenue and other interest income was $2.5 billion for the year ended December 31, 2023, compared to $1.4 billion for the year ended December 31, 2022. The increase was primarily driven by the impacts of a higher interest rate environment on the investment securities portfolio and hedging activities, in addition to higher interest associated with cash and cash equivalents and growth within unsecured lending.

Total interest expense increased $2.0 billion for the year ended December 31, 2023, compared to the year ended December 31, 2022. Interest expense in our Corporate and Other segment includes our external borrowing costs less the amount charged to our operating segments, which is based on our FTP methodology. The increase in interest expense was primarily driven by higher deposit costs during the year reflecting a higher overall interest rate environment.

Total other revenue increased $44 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily driven by net downward adjustments (including impairment) related to equity investments without a readily determinable fair value during the year ended December 31, 2022, that did not reoccur during the current periods. The increase was partially offset by a decrease in income from equity method investments and a decrease in other gains on investments.

The provision for credit losses decreased $16 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. For the year ended December 31, 2023, the decrease in provision for credit losses was primarily driven by lower portfolio loan growth as compared to the same period in 2022 for Ally Lending and Ally Credit Card in addition to a provision benefit from the transfer of Ally Lending to held-for-sale, partially offset by higher net charge-offs within Ally Credit Card and Ally Lending. Refer to the Risk Management section of this MD&A for further discussion on our provision for credit losses.

Noninterest expense increased $129 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily driven by increased compensation and benefits expense, inclusive of the restructuring charges associated with a workforce reduction and goodwill impairment from the transfer of our Ally Lending operations to held-for-sale, partially offset by lower other operating expenses.

Total assets were $42.2 billion as of December 31, 2023, compared to $41.6 billion as of December 31, 2022. Total assets include the amortized cost of the legacy mortgage portfolio of $225 million as of December 31, 2023, compared to $290 million at December 31, 2022.

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Cash and Securities

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

(a)Includes a $16 million investment in BHF as of December 31, 2023, which was recorded as a nonmarketable equity investment as of December 31, 2022, on the Consolidated Balance Sheet.

(b)Includes transfers of available-for-sale securities to held-to-maturity securities. Refer to Note 8 to the Consolidated Financial Statements for further information.

Other Investments

The following table summarizes other investments at carrying value for Corporate and Other. Refer to Note 1 to the Consolidated Financial Statements for further information on these investments.

(a)Includes a $19 million investment in BMC Holdco as of December 31, 2022, which was transferred to equity securities on the Consolidated Balance Sheet as of December 31, 2023.

(b)Primarily comprises 62 and 55 investments made in connection with our CRA program at December 31, 2023, and December 31, 2022, respectively. The carrying value of these investments was $595 million and $557 million at December 31, 2023, and December 31, 2022, respectively.

Nonmarketable equity investments and equity-method investments include strategic investments made through Ally Ventures. Ally Ventures identifies, invests in, and builds relationships with key startups. At December 31, 2023, the carrying value of investments made through Ally Ventures was $49 million, comprising 18 investments, as compared to $81 million comprising 18 investments at December 31, 2022. Refer to Note 13 to the Consolidated Financial Statements for additional information.

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Ally Invest

Ally Invest is our digital brokerage and advisory offering, which enables us to complement our competitive deposit products with low-cost and commission-free investing. The following table presents trading days and average customer trades per day, the number of funded accounts, total net customer assets, and total customer cash balances as of the end of each of the last five quarters.

(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 activity across the brokerage, robo and advisory portfolios.

During the year ended December 31, 2023, total funded accounts increased 1% from the fourth quarter of 2022. Average customer trades per day decreased 14% from the fourth quarter of 2022, driven by continued lower customer engagement. Additionally, net customer assets increased 18% from the fourth quarter of 2022, as a result of changes in equity market valuations and total accounts.

Ally Lending

Ally Lending is our unsecured personal lending offering, which primarily serves home improvement and medical service providers by enabling promotional and fixed rate installment-loan products through a digital application process at point-of-sale. On December 31, 2023, we committed to sell our point-of-sale financing business, Ally Lending. For further information, refer to Note 2 to the Consolidated Financial Statements. Active merchants totaled approximately 2,400 as of December 31, 2023. Active borrowers totaled approximately 460,000 as of December 31, 2023.

The following table presents personal lending originations and average FICO® Score.

(a)Includes loans for which we have elected the fair value option measurement during the year ended December 31, 2022.

During the year ended December 31, 2023, personal lending originations decreased $593 million to $1.5 billion, as compared to the year ended December 31, 2022.

We transferred our personal lending portfolio balance to assets of operations held-for-sale as of December 31, 2023. For further information, refer to Note 2 to the Consolidated Financial Statements. The associated yield was 9.9% for the year ended December 31, 2023, as compared to 11.3% for the year ended December 31, 2022. The decrease in yield for the year ended December 31, 2023, as compared to the same period in 2022, was primarily due to increased originations in the home improvement vertical, as well as a shift in origination mix to customers with higher average FICO® scores.

Ally Credit Card

Ally Credit Card is our scalable, digital-first credit card platform that features leading-edge technology, and proprietary, analytics-based underwriting and portfolio-management models. The following table presents total active cardholders and finance receivables and loans.

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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 use multiple layers of defense to identify, monitor, and manage current and emerging risks.

•Business lines — Responsible for owning and managing all the risks that emanate from their risk-taking activities, including business units and support functions.

•Independent risk management — Operates independent of the business lines and is responsible for establishing and maintaining our risk-management framework and promulgating it enterprise-wide. Independent risk management also provides an objective, critical assessment of risks and—through oversight, effective challenge, and other means—evaluates whether Ally remains aligned with its risk appetite.

•Internal audit — Provides its own independent assessments regarding the quality of our loan portfolios as well as the effectiveness of our risk management, internal controls, and governance. Internal audit includes Audit Services and the Loan Review Group.

Our risk-management framework is overseen by the RC. The RC sets the risk appetite across our company while risk-oriented management committees, the executive leadership team, and our associates identify and monitor current and emerging risks and manage those risks within our risk appetite. Our primary types of risks include the following:

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

•Insurance/underwriting risk — The risk of loss or of adverse change in the value of insurance liabilities, due to inadequate pricing and provisioning assumptions.

•Liquidity risk — The risk that our financial condition or overall safety and soundness is adversely affected by the actual or perceived inability to liquidate assets or obtain adequate funding or to easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions. Refer to discussion in the section titled Liquidity Management, Funding, and Regulatory Capital within this MD&A.

•Market risk — The risk that movements in market variables such as benchmark interest rates, investors’ required risk premium, foreign-exchange rates, equity prices, and used car prices may adversely affect our earnings, capital, or economic value. Market risk includes interest rate risk, investment risk, and lease residual risk.

•Business/strategic risk — The risk resulting from the pursuit of business plans that turn out to be unsuccessful due to a variety of factors.

•Reputation risk — The risk arising from negative public opinion on our business practices, whether true or not, that could cause a decline in the customer base, litigation, or revenue reductions.

•Operational risk — Operational risk is the risk of loss or harm arising from inadequate or failed processes or systems, human factors, or external events and is inherent in all of our risk-generating activities.

•Model risk — The potential for adverse consequences from decisions based on incorrect or misused model assumptions, inputs, outputs, and reports. This risk may include fundamental errors within the model that produce inaccurate outputs or that the model is used incorrectly or inappropriately.

•Information technology/cybersecurity risk — The risk resulting from the failure of, or insufficiency in, information technology (for example, a system outage) or intentional or accidental unauthorized access, sharing, removal, tampering, or disposal of company and customer data or records (for example, cybersecurity).

•Compliance risk — The risk of legal or regulatory sanctions, financial loss, or damage to reputation resulting from failure to comply with laws, regulations, rules, other regulatory requirements, or codes of conduct and other standards of self-regulatory organizations applicable to the banking organization (applicable rules and standards).

•Conduct risk — The risk of customer harm, employee harm, reputational damage, regulatory sanction, or financial loss resulting from the behavior of our employees and contractors toward customers, counterparties, other employees and contractors, or the markets in which we operate.

Our risk-governance structure starts within each business line, including committees established to oversee risk in their respective areas. The business lines are responsible for their risk-based performance and compliance with risk-management policies and applicable law. The independent risk-management function is accountable for independently identifying, monitoring, measuring, and reporting on our various risks and for designing an effective risk-management framework and structure. The independent risk-management function is also responsible for developing, maintaining, and implementing enterprise risk-management. In addition, the ERMC is responsible for supporting the Chief Risk Officer’s oversight of senior management’s responsibility to execute on our strategy within our risk appetite set by the RC, and the Chief Risk Officer’s implementation of our independent risk-management program. The Chief Risk Officer reports to the RC, as well as administratively to the CEO.

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All business lines and corporate functions are subject to full and unrestricted audits by Audit Services. The Chief Audit Executive reports to the AC, as well as administratively to the CEO, and is primarily responsible for assisting the AC 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 extensions of credit and credit-risk-management practices, and all business lines that create or influence credit risk are subject to full and unrestricted reviews by the Loan Review Group. This group is also granted free and unrestricted access to any and all of our records, physical properties, technologies, management and employees, and reports directly to the RC.

In addition to the primary risks that we manage, climate-related risk has been identified as an emerging risk. Climate-related risk refers to the risk of loss or change in business activities arising from climate change and represents a transverse risk that could impact other risks within Ally’s risk-management framework, such as credit risk from negatively impacted borrowers, reputation risk from increased stakeholder concerns, and operational risk from physical climate risks. Refer to section titled Climate-Related Risk within this section for more information.

Loan and Operating Lease Exposure

The following table summarizes the exposures from our loan and operating-lease activities based on our reportable operating segments.

(a)Includes a liability of $93 million and $617 million associated with fair value hedging adjustments at December 31, 2023, and December 31, 2022, respectively. Refer to Note 21 to the Consolidated Financial Statements for additional information.

(b)Includes $225 million and $290 million of consumer mortgage loans in our legacy mortgage portfolio at December 31, 2023, and December 31, 2022, respectively.

(c)Represents the current balance of conforming mortgages originated directly to the held-for-sale portfolio.

(d)Includes $1.9 billion of assets of operations held-for-sale as of December 31, 2023. Refer to Note 2 to the Consolidated Financial Statements for additional information.

(e)Represents the current unpaid principal balance of outstanding loans based on our customary representation and warranty provisions.

The risks inherent in our loan and operating lease exposures are largely driven by changes in the overall economy (including GDP trends and inflationary pressures), used vehicle and housing prices, unemployment levels, real personal income, household savings, and their impact on our borrowers. The potential financial statement impact of these exposures varies depending on the accounting classification and future expected disposition strategy. We retain most of our consumer automotive and credit card 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

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economics of the exposure. Our operating lease residual risk may be more volatile than credit risk in stressed macroeconomic scenarios. While all operating 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.

•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 a secured borrowing. Finance receivables and loans are reported at their amortized cost basis, 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 net charge-offs. We refer to the amortized cost basis less the allowance for loan losses 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 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 may use market-based instruments, such as derivatives, to hedge changes in the fair value of these loans.

•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. 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, warranty and covenant 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 accordingly at contract inception, we determine pricing based on the projected residual value of the leased 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 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 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 operating lease asset as well as any associated rent receivables. The operating lease rent receivable is accrued when collection is reasonably assured and presented as a component of other assets. The operating lease asset is reviewed for impairment in accordance with applicable accounting standards.

Refer to the section titled Critical Accounting Estimates within this MD&A and Note 1 to the Consolidated Financial Statements for further information.

Credit Risk

Credit risk is defined as the risk of loss arising from an obligor not meeting its contractual obligations to us. Credit risk includes consumer credit risk, commercial credit risk, and counterparty credit risk.

Credit risk is a major source of potential economic loss to us. Credit risk is monitored by the executive leadership team and our associates, and is regularly reported to and reviewed with the RC. Management oversees credit decisioning, account servicing activities, and credit-risk-management processes, and manages credit risk exposures 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 reports its findings to the RC on a regular basis.

To mitigate risk, we have implemented specific policies and practices across business lines, utilizing both qualitative and quantitative analyses. This reflects our commitment to maintaining 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 operating lease portfolios. This includes the identification of relevant trends that affect the collectability of the portfolios, microsegments of the portfolios that are potential problem areas, loans and operating leases with potential credit weaknesses, and the assessment of the adequacy of internal credit risk policies and procedures. Our consumer and commercial loan and operating lease portfolios are subject to periodic stress tests, which include economic scenarios whose severity mirrors those developed and distributed by the FRB to assess how the portfolios may perform in a severe economic

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downturn. In addition, we establish and maintain underwriting policies and limits across our portfolios and higher risk segments (for example, 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 with the aim of generating appropriate risk-adjusted returns. 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 relative to expected credit losses at contract inception. We closely monitor our loan performance and profitability 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 and economic conditions. We monitor the credit risk profile of individual borrowers, various segmentations (for example, geographic region, product type, industry segment), as well as the aggregate portfolio. We perform quarterly analyses of the consumer automotive, consumer mortgage, consumer other, and commercial portfolios to assess the adequacy of the allowance for loan losses based on historical, current, and anticipated 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. We have enhanced our collection strategies to include customized messaging, digital communication, and proactive monitoring of vendor performance. We may offer several types of assistance to aid our customers based on their willingness and ability to repay their loan. As part of certain programs, we offer loan modifications to qualified borrowers, including payment extensions, interest rate concessions, and principal forgiveness.

Furthermore, we manage our credit exposure to financial counterparties 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, lending arrangements, and certain cash balances. For more information on derivative counterparty credit risk, refer to Note 21 to the Consolidated Financial Statements.

We employ an internal team of economists to enhance our planning and forecasting capabilities. This team conducts industry and market research, monitors economic risks, and helps support various forms of scenario planning. This group closely monitors macroeconomic trends given the nature of our business and the potential impacts on our exposure to credit risk. The unemployment rate remained low at 3.7% as of December 31, 2023. Sales of new light vehicles were higher than 2022, but slowed sequentially to an average annual rate of 15.5 million during the fourth quarter of 2023. Sales of new light motor vehicles remain below the pre-pandemic annual pace of 17.0 million in 2019, driving an increase in used vehicle values, as further described in the section below titled Operating Lease Vehicle Terminations and Remarketing. Additionally, used vehicle values may also be impacted by availability, the price of new vehicles, or changes in customer preferences. However, macroeconomic risks remain elevated.

Consumer Credit Portfolio

Our consumer loan portfolio primarily consists of automotive loans, first-lien mortgages, home equity loans, personal loans, and credit card loans. Loan losses in our consumer loan portfolio are influenced by changes in the overall economy (including GDP trends and inflationary pressures), used vehicle and housing prices, unemployment levels, real personal income, household savings, and their impact on our borrowers. Additionally, our consumer credit exposure is significantly concentrated in automotive lending.

Credit risk management for the consumer loan 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 continue to monitor loss performance across the risk spectrum, which enables us to implement risk mitigation strategies, including pricing increments and curtailment actions on underperforming microsegments. We continuously monitor and routinely update the inputs of the credit scoring models. These and other actions mitigate but do not eliminate credit risk. Ineffective evaluations of a borrower’s creditworthiness, fraud, 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 important factor in managing consumer credit risk. Servicing activities consist of collecting and processing customer payments, responding to customer concerns and inquiries, processing customer requests (including those for payoff quotes, total-loss handling, and payment modifications), maintaining a perfected security interest in the financed vehicle, engaging in collections activity, 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 state laws.

During the year ended December 31, 2023, the credit performance of the consumer loan portfolio reflected our underwriting strategy to originate a diversified portfolio of consumer automotive loan assets, including new, used, prime and nonprime finance receivables and loans, high-quality jumbo and LMI mortgage loans that are obtained through bulk loan purchases and direct-to-consumer mortgage originations, as well as point-of-sale personal lending through Ally Lending. We also offer revolving, unsecured loans through Ally Credit Card. The carrying value of our nonprime held-for-investment consumer automotive loans before allowance for loan losses represented approximately 10.3% and 10.6% of our total consumer automotive loans at December 31, 2023, and December 31, 2022, respectively. For information on our consumer

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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 amortized cost.

(a)Includes nonaccrual TDR loans of $684 million at December 31, 2022.

(b)Loans are generally in nonaccrual status when principal or interest has been delinquent for 90 days or more, or when full collection is not expected. Refer to Note 1 to the Consolidated Financial Statements for additional information on our accounting policy for finance receivables and loans on nonaccrual status.

(c)Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 21 to the Consolidated Financial Statements for additional information.

(d)Includes outstanding CSG loans of $10.2 billion and $10.0 billion at December 31, 2023, and December 31, 2022, respectively, and RV loans of $459 million and $578 million at December 31, 2023, and December 31, 2022.

(e)Personal Lending finance receivables and loans, net were transferred to loans held-for-sale, and are included in assets of operations held-for-sale on our Consolidated Balance Sheet at December 31, 2023. Refer to Note 2 to the Consolidated Financial Statements for additional information.

(f)Excludes finance receivables of $3 million at December 31, 2022, for which we have elected the fair value option.

Total consumer finance receivables and loans decreased $1.6 billion at December 31, 2023, compared with December 31, 2022. The decrease for 2023 was primarily due to the transfer of personal lending finance receivables and loans to assets of operations held-for-sale as a result of our commitment to sell our Ally Lending business. Additionally, our consumer mortgage finance receivables and loans decreased $1.1 billion due to portfolio runoff outpacing originations and purchases. When interest rates rise, the likelihood of refinancing decreases and origination volumes tend to decrease. The decrease was partially offset by a $1.0 billion increase in consumer automotive finance receivables and loans, primarily due to loan originations outpacing portfolio runoff.

Total consumer nonperforming finance receivables and loans at December 31, 2023, decreased $17 million to $1.3 billion from December 31, 2022. 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 was 1.2% at both December 31, 2023, and December 31, 2022.

Consumer automotive loans accruing and past due 30 days or more increased $768 million to $3.7 billion at December 31, 2023, compared with December 31, 2022, as delinquencies have increased amid deterioration in macroeconomic conditions, driven by persistent inflation. During the year ended December 31, 2023, we observed a slowing rate of increase in delinquency trends within our consumer automotive loan portfolio, as compared to 2022, as we continue to make adjustments to our underwriting strategies.

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The following tables include consumer net charge-offs and write-downs from transfers to loans held-for-sale from finance receivables and loans at amortized cost and related ratios.

(a)Consumer automotive includes a $41 million reduction of allowance from the sales of retained interests related to securitizations during 2023, resulting in the deconsolidation of the assets and liabilities from our Consolidated Balance Sheet. Refer to Note 11 to the Consolidated Financial Statements for further information.

(b)Consumer other includes a $174 million reduction of allowance from transfers to held-for-sale related to Personal Lending. Refer to Note 2 to the Consolidated Financial Statements for additional information.

(c)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.

(d)Net charge-off and write-downs from transfers to held-for-sale ratios are calculated as net charge-offs and write-downs from transfers to held-for-sale 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.