ALLY

Business Context and Reporting Period

This summary covers the Form 10-Q for GMAC Inc. (now Ally Financial Inc.) for the quarterly period ended September 30, 2009. During this period, the company completed its conversion from a limited liability company to a Delaware corporation effective June 30, 2009, and operates as a bank holding company. The company is heavily dependent on General Motors (GM) and Chrysler for automotive financing volume. Significant restructuring activities occurred, including the classification of U.S. consumer property and casualty insurance and certain international automotive operations as discontinued.

Key Financial Metrics

Material Changes vs. Prior Period

• Improved Losses: The net loss from continuing operations improved significantly in Q3 2009 ($671 million) compared to Q3 2008 ($2.5 billion), driven by lower interest expense, reduced impairment charges on operating leases, and a strengthening used vehicle market.
• Revenue Growth: Total net revenue increased 76% year-over-year in Q3 2009, primarily due to gains on mortgage and automotive loans and other investment gains, offsetting declines in financing revenue due to lower asset levels.
• Debt Reduction: Total debt decreased by approximately $24 billion from year-end 2008 to September 30, 2009, reflecting asset runoff and debt extinguishment activities.
• Discontinued Operations: The company recognized a net loss of $96 million from discontinued operations in Q3 2009, related to the sale of U.S. consumer insurance and international automotive assets.
• Capital Structure: The company received $7.5 billion in preferred stock from the U.S. Department of the Treasury in May 2009 and $1.2 billion in common equity contributions.

Guidance, Outlook, and Risks

• ResCap Liquidity Risk: Residential Capital, LLC (ResCap), a mortgage subsidiary, faces significant near-term liquidity issues. The filing states there is "substantial doubt" about ResCap's ability to continue as a going concern without continued support from GMAC. GMAC has provided $1.2 billion in capital to ResCap in the first nine months of 2009 but has no formal commitment for future support.
• Regulatory Capital: As a bank holding company, GMAC must meet specific capital ratios. As of September 30, 2009, the company was "well-capitalized" with a Tier 1 leverage ratio of 13.50% and a Total risk-based capital ratio of 15.82%, exceeding the required minimums.
• Market Conditions: The company continues to face challenges in the residential mortgage market and capital markets. Access to unsecured debt markets remains strained, though the company has utilized government programs like the FDIC's Temporary Liquidity Guarantee Program (TLGP).
• GM and Chrysler Dependence: The company's automotive finance volume is heavily tied to GM and Chrysler sales. The recent bankruptcy and restructuring of GM and Chrysler introduce uncertainty regarding future sales volumes and credit quality.

Investor Verification Checklist

• ResCap Support: Verify the extent of GMAC's ongoing financial support for ResCap and the specific terms of any new capital injections or debt restructuring.
• Asset Quality: Review the allowance for loan losses coverage ratios, particularly for the mortgage portfolio, given the high levels of nonaccrual loans and delinquencies.
• Debt Maturities: Analyze the schedule of debt maturities, specifically the significant unsecured debt obligations coming due in 2010 and 2011, and the company's refinancing strategy.
• Discontinued Operations: Confirm the expected closing dates and final sale prices for the U.S. consumer insurance and international automotive operations classified as held-for-sale.
• Regulatory Compliance: Monitor the company's ability to maintain the required capital ratios under the Supervising Capital Assessment Program (S-CAP) and the Capital and Liquidity Maintenance Agreement (CLMA).